FHA loans are mortgages, backed by the Federal Housing Administration, that may offer you savings on your home down payment. This loan program was created to give individuals access to homeownership, even without good credit or a long credit history. If you’re looking to buy a home here in the Chambersburg area or surrounding boroughs, your first step could be applying for an affordable FHA mortgage.
FHA Home Loan Basics
FHA mortgages are guaranteed by the Federal Housing Administration, which gives mortgage lenders confidence to offer these home loans with a low 3.5 percent down payment requirement. If your credit score is 580 or above, this FHA loan could be the home financing option you are looking for. You could qualify with a lower credit score, between 500 and 579, when you provide a higher down payment of 10 percent.
You will typically have a slightly higher interest rate on the mortgage with a lower credit score. For down payments below 20 percent, however, you will also need to pay monthly mortgage insurance on your home mortgage to lower the lender’s risk for making the loan. Once you reach 20 percent equity, you can have mortgage insurance removed if you refinance the FHA loan to a conventional mortgage.
FHA Mortgage Advantages
FHA loans are easier to qualify for than conventional home loans. The low-down-payment FHA loan can help you get into a house sooner, since you won’t need to spend many years saving up the traditional 20 percent down. An FHA mortgage is also a great option if your credit is not well-established or your credit score is “just ok” but not great.
The low down payment can make the FHA a good option for low-income buyers, but high-income individuals can also benefit. Higher-income people may not qualify for many first-time homebuyer mortgage programs, so the FHA loan can be an option. Even if you have a bankruptcy or prior foreclosure on your credit history, you could still potentially qualify for an FHA mortgage. Another FHA loan benefit is that if you later sell your house, the new buyer could simply take over the FHA loan from you, making the sales process simpler and possibly saving on closing costs.
History of FHA Home Loans
The FHA loan came about after the US had suffered through the Great Depression of the 1930s. People, along with the entire US economy, had also endured the Dust Bowl period, when Western and Midwestern farms were destroyed by drought and poor soil conservation. To help more people afford to buy a home, the government guarantee designed into the FHA mortgage made it easier for banks to lend money for housing purchases. In addition, the National Housing Act of 1934 also encouraged quality homebuilding (and all its related economic activity) with these loans. FHA loans gave home builders (and homeowners) a larger market to sell new homes to, more people became employed in-home construction, renovation, and other industries.
How to Apply for an FHA Loan
If you’re interested in an FHA home mortgage, please talk to a Homespire Mortgage representative. We can help you compare all your loan options and help the process go smoothly with a loan consultant you can reach 7 days a week.We believe in making the application process simple and stress-free for local residents in the Chambersburg area of PA. We serve multiple boroughs of Franklin County, including Greencastle, PA, Fayetteville, PA, Mont Alto, PA, Shippensburg, PA, Mercersburg, PA, and Waynesboro, PA. Let us help you finance your new home in a stress-free environment!