A FHA (Federal Housing Administration) loan is especially suitable for first-time home buyers. The U.S. Department of Housing and Urban Development (HUD) acquires FHA-insured homes which have been foreclosed. HUD homes are made available for sale through websites run by management companies contracted by HUD. Real estate agents who are registered with HUD can present offers on behalf of their clients. The agent's commission is paid by HUD.
HUD homes are sold on an 'as is' basis with no warranty. Since HUD does
not take responsibility for any repairs, it is important to have the
home inspected prior to making the offer. The down payment for FHA loans
is only 3.5%, which is significantly lower than the 20% paid for
conventional loans. This down payment can come from own savings, family
members, employers or charity organizations. Closing costs for FHA loans
are also significantly lower than conventional mortgages. An exception
to the 3.5% down payment is the HUD $100 down payment initiative. Buyers
can now purchase a HUD foreclosed home with only $100 down payment.
FHA has designed various mortgage loans for the public. Depending on an
individual's ability, one can select either an FHA fixed rate mortgage
loan or FHA adjustable rate mortgage loan. There are also other special
loans like the graduated payment mortgage loan, energy efficient loans,
and other loans for other different needs. However, one of the most
popular FHA loan programs is the FHA 203K Mortgage. This mortgage
enables individuals to acquire financing to renovate their present
homes. In addition, the FHA 203K mortgage can also be used to purchase
and rehabilitate a house in a different place. Once the buyer decides
which FHA mortgage suits them, they can go ahead to apply for the loan.
Professional advice for choosing an appropriate loan can be provided by a
mortgage loan broker.
Despite the friendly terms of FHA mortgage loans, individuals have to
fulfill certain FHA mortgage guidelines. These requirements are in
accordance to federal guidelines. To get an FHA loan, one must have been
in stable employment, if possible with the same employer, for two
years. The borrower should have a minimum credit score of 580, and a
debt-to-income ratio of less than 41%. Monthly payments should not
exceed 30% of the borrower's salary. FHA will allow individuals to
purchase a home three years after a foreclosure, and two years after a
Since FHA loans are insured by the federal government, they come with
competitive interest rates and lenders are likely to give friendly terms
that will simplify the process of getting a loan. Even with
less-than-perfect credit, FHA loans are easier to obtain than
conventional mortgage. In particularly designated areas, K-12 teachers,
law enforcement officers, emergency medical technicians and fire
fighters can buy a home at price 50% less than the listed price. In
addition, evacuees from hurricanes Rita, Katrina or Wilma can buy a HUD
home at a discounted rate.
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