The global financial crisis of 2007–08 put mortgage lending practices in the headlines, as many cited high-risk lending practices as the primary cause of a worldwide economic decline. A subsequent credit crunch occurred as lenders pulled back their offers and mitigated risk. Lost in the shuffle were the millions of hard-working Americans whose financial situation or credit history located them below the top tier of borrowers. For them, the dream of home ownership seemed washed away in the currents that followed the global meltdown.
The good news is that the tightening of the credit market still provides opportunities for you to become a home owner. At Nationwide Home Loans, our primary goal is to help you realize your dreams of home ownership. We achieve this in part through our expert knowledge of the lending industry, but also through the benefits offered in various federal programs, including Federal Housing Administration (FHA) programs. FHA programs can break down the barriers between you and home ownership. Ready to learn more?
How FHA Programs Make Affordable Mortgage Rates in Florida Possible
So how does a federal program suddenly make lenders more interested in helping you achieve your goals? Put simply, FHA loans are private mortgage loans insured by the federal government. They protect lenders because, in the event that a borrower fails to pay back a loan, the government repays the lender. It reduces the risk for the lender, which means the lender is more inclined to make credit available—and at better interest rates.
Benefits of an FHA Loan
The most notable benefit of FHA loans is their ability to make the impossible, possible. But they offer borrowers much more than a private lender willing to supply their mortgage. FHA loans, first established in 1934, have a small down payment, just 3.5 percent. This small down payment (compared to more common down payments of about 20 percent industry-wide) means that you don't have to have a ready stockpile of cash to purchase a home. After all, most people purchase their next home with cash built up in the equity of a previous home. This can be a challenging cycle to enter if you've never had the financial means to own a home in the first place. And if meeting that 3.5 percent target is still a challenge, FHA loans allow that cash-down to be met with a gift from a family member or a state or local government grant.
Like down payments, closing cost can be another prohibitive out-of-pocket expense for some home buyers. With FHA loans, the seller, builder, or lender may be able to cover some of your closing costs. Allowing them to meet short-term costs for titling or appraisal benefits them as well, as it may help facilitate a sale. Your closing costs can also be rolled into your mortgage so that they're paid over time.
Lenders must receive approval to be able to issue FHA loans, so not every bank is able to provide FHA benefits. Nationwide Home Loans has a full slate of loan options, and we are an approved FHA lender.
Requirements to Qualify for an FHA Loan
Many Americans qualify for FHA loans, but there are some important stipulations in addition to the 3.5 percent down payment. In order to be a qualified applicant, you must have a steady employment history, with the same employer for the last two years. Your loan also must be for primary residence occupancy; in other words, FHA loans aren't for people looking to buy a house just to rent it. You must have a minimum credit score of 580 to receive maximum financing, and your total monthly mortgage payment (which includes property taxes, mortgage insurance, and the like) cannot exceed 31 percent of your gross income.
If you think you qualify for an FHA loan—or if you're still not sure that you do—just get in touch with us at Nationwide Home Loans. We exist to help you find the most affordable mortgage rates in Florida.