San Diego, CA (PRWEB) June 03, 2013
Many California home buyers are looking for the best loan deals that will enable them to purchase their home without hurting their current finances and that will also ensure that their mortgage payments are still manageable for the duration of the loan. If a homeowner does not have enough money saved for a large down payment on a home loan, but still has decent credit standing, an FHA loan may be the answer. LoanLove.com covers the pros and cons of an FHA loan California home buyers should be aware of when they are deciding if this loan option is the right choice for them.
The Loan Love article explains the basics of an FHA loan. An FHA mortgage is a mortgage that’s been guaranteed (i.e., insured) by the Federal Housing Administration. The actual loan is made by a bank or other traditional mortgage lender, but FHA underwriting means the lender won’t be left on the hook if the borrower defaults. Because there is a lot less risk involved for the lender, it is easy to see why this loan option is popular with them. However, there are also many benefits of FHA mortgages for home buyers.
As the article explains, the largest advantage of getting qualified for an FHA mortgage is that the down payment required is often much less than with other loan products. Because the loan is federally backed, lenders are willing to assume a larger mortgage amount. This means that a home buyer might be able to purchase a home with a down payment of as little as 3.5%.
Another advantage is that some FHA loans are assumable. This is a big advantage for buyers who are planning to resell the house down the line, as it makes it easier for the new owner as they will not need to qualify for another loan product. This can make the home a much more attractive sell and make it easier for the original home owner to find a new buyer.
However, there are also some drawbacks to FHA mortgages. As the article explains, some of the things that might make this loan option a less attractive option for some home buyers are that interest rates are often higher than the standard mortgage rates, especially for buyers with very good credit. Also FHA loans are usually not available for more expensive properties or properties in “high cost” areas. Other loan products are usually more flexible in the amounts you can borrow. FHA loans also require the borrower to pay a mortgage insurance premium at closing and an additional mortgage insurance fee with the first 60 monthly payments; these fees help mitigate potential losses the FHA might face when borrowers default.
However, despite these apparent drawbacks, FHA loans are still often a very good choice for first time home buyers or those with lower incomes. Those who wish to learn more about these types of loans can visit LoanLove.com to view the full article.