Getting a mortgage is one of the biggest decisions you’ll make in your life. It can be daunting, especially if you’re a first-time home buyer. And if you’re not familiar with the ins and outs of getting approved for a mortgage loan, it can be hard to know where to start.
What Are FHA Loans?
FHA loans are insured by the federal government, giving them a low-risk factor for lenders. This means that FHA loans are less risky than conventional loans. Additionally, lenders assume less risk with an FHA loan than they do with conventional loans. Because of this, you can get approved for an FHA loan in Ohio with a lower credit score and smaller down payment than you would need for a conventional loan.
FHA Loans Compared To Conventional Mortgages
FHA loans have a minimum credit score of 500, which is significantly lower than the conventional loan’s minimum of 620. This means that you can get an FHA loan even if you don’t meet all of the standards set by conventional lenders. The agency also offers other benefits like low down payments and flexible terms, you can apply for an FHA loan with as little as 3.5% in down payment, whereas conventional loans require at least 10% or 20% for a home purchase.
FHA Loans Allow First-time Home Buyers To Put Down As Little As 3.5%
The minimum down payment for an FHA loan varies based on the loan. For example, for a purchase loan, the minimum down payment is 3.5%. This means that you would have to pay at least 3.5% of the purchase price to get your loan approved. On the other hand, if you’re buying a home that doesn’t need any repairs or upgrades (or if those repairs and upgrades will be paid out of pocket), then you can put as little as 3% down.
The government considers this type of low-down payment risky and wants buyers to make sure they can afford their monthly payments before committing to a mortgage by making sure they have enough “equity” in their homes, that is, how much money they would receive if someone bought their houses from them without paying them any money up front?
FHA Loans Have Flexible Credit Requirements
Although FHA Loans can be used by any borrower, they are most beneficial to those who might not meet the strict requirements of a conventional loan. For example, if you have a lower income or credit score than what is required by conventional lenders, you may still be able to get an FHA Loan. There are plenty of FHA Loans Ohio lenders. Just do your research on the company before you apply for a loan.
Conclusion
Are you a first-time homebuyer with a low credit score? Are you worried that your low income will make it difficult to qualify for the best rates and terms? If so, an FHA loan may be right for you.
