Getting an FHA Approved Loan

| January 2, 2012

Getting an FHA approved loan is still one of the most favored ways for first time home buyers to purchase a home or condominium. Generally speaking these loans are offered at more favorable terms than the average loan a consumer can get in most any type of market.

FHA approved loans usually provide the first time home buyer with the necessity for lower down payment money, often a better or highly competitive interest rate and much more lenient debt ratios for the consumer. Due to the changes in the real estate market many banks have pulled back on lending. In fact the availability of lending money in general has seen more restrictions across the board for many first time home buyers.

The FHA, also known as the Federal Housing Authority is the one source that has a little more leniency than that of the typical banking institution. It was established specifically to offer more average families a chance at the American Dream. To make this a more viable reality the restrictions are more flexible in certain areas such as allowance for monetary gifts for down payment money and less funds for a down payment. Many FHA loans require only a 5% down payment in contrast to the typical 10% to 20% allowed by most banks today. FHA also allows the home buyer to have slightly more outstanding debt when qualifying them to purchase a home. For many people starting out this can be a great help. These are just a few of the advantages of an FHA loan.

There are certain restrictions with an FHA loan so home buyers should be thorough and check with their local mortgage officer or bank that handles these types of loans to see what restrictions may apply to their situation. One common restriction is in the condominium market, some of these condominium complexes are not eligible for FHA funding because they have not enough owner occupied units and to many investor units. This should be checked before attempting to purchase a unit within a complex. Again lenders are able to verify this information with FHA prior to writing a sales contract. Realtors are a good source to verify this as well.

An FHA loan has many advantages that were built in to help consumers achieve the dream of owning their own home. It should be cautioned that FHA does have limitations and restrictions as well. Consumers need to be aware of this so they don’t go through a long process of a loan only to be turned down for a basic restriction that a lender or realtor should know about.

Processing times for FHA loans can run a little longer than some banking institutions, but they usually average about a 45 day turn around time. Consumers who seek an FHA loan usually also have the option to lock in the interest rate and this can be an important advantage in a volatile market. Home buyers that seek an FHA loan should check if there are any costs involved in locking in the rate and ask the lender if there are any other costs for the loan that they need to be apprised of.

Category: Home Loan

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