Home ownership is currently on the rise as more people buy into the concept of living on their property. The cost of rent is also steadily increasing with the tough economic times. Statistics also show that rental expenses take up a significant proportion of a household’s expenditure. Therefore, owning a home provides substantial savings to families.
So, what is a FHA mortgage loans? They are loans administered by the federal housing administration. They are very popular due to their low-interest rates. Newly graduated students, in particular, prefer FHA loans for a mortgage over any other type of loans. The reason is that they have not yet saved a substantial amount of money to purchase a house outrightly. Besides, most recent graduates are in the process of starting off their careers. To obtain an FHA loan, a borrower needs to have a credit score of 580 and make FHA home loans down payment of 3.5 percent.
Situations That Necessitate FHA Loans Refinancing
The process of refinancing is whereby you replace a current loan obligation with a new one. Refinancing is not possible with FHA loans under normal circumstances. One is required to settle the former debt before they can apply for another one. However, there are special occasions where a homeowner can refinance their loan.
If the current owner of a house shifts residences before completing a loan, they can apply for FHA home loans refinance. However, they only become eligible for refinancing if the new residence is beyond commuting distance. For instance, one can relocate to a different state for work purposes. While in the new location, they can apply for an FHA loan. The Department of Housing and Urban Development (HUD) does not have precise regulations on what is the acceptable commuting distance. However, in most cases, anywhere more than an hour’s drive is considered far enough.
When family size increases, a homeowner can apply for a new FHA loan. However, to secure this financing, adequate proof needs to be given whether indeed the family is too large to dwell in the current home comfortably. A valid property appraiser approved by the FHA will undertake this task, and once they confirm the inadequacy of the present house, the FHA will authorize the new loan.
Buying a multifamily unit also qualifies a homeowner for refinancing. Someone can buy multiple unit properties then choose to occupy one while renting out the remaining units. One can also purchase a duplex unit whereby they live in one and rent out the other. Similarly, there is another option to buy a triplex unit and so forth. In the event whereby you bought a house for primary residence, and you now wish to buy another and make it your principal residence, you can as well seek refinancing from the FHA. Whether it is FHA plus loans or condominium loans, you are guaranteed the best services.
The Dilemma New Graduates Face Between FHA and Student Loans
FHA Mortgage student loans are usually the first option for first-time home buyers since they offer extremely low down payments, easy credit, and closing costs. However, new college graduates may not find such loans attractive. Apart from the (HUD), the FHA provides insurance to home loans to enable lenders to offer better deals to aspiring homeowners. If a college graduate has pending student loans, he or she can experience more challenges getting a loan because these loans will create a big debt-to-income ratio. For this reason, FHA loans and student Loans rarely coincide.
There are measures a former student can take to qualify for FHA purchase loans. One of them is to understand the new loan deferment rules better. FHA rules now require the inclusion of 2 percent of the outstanding student loan balance into the Debt-to-Income ratio (DTI). The argument behind this rule is that deferred student debts accrue monthly payments within a year. Therefore, graduates should factor in this cost while purchasing a house.
Another option would be to decrease your debt to income ratio. This process is not that easy, but you can achieve a low DTI through extra payments and clearing student loans before they mature. You can also change to repayment arrangements that reduce monthly installments, for example, the pay as you earn method. Lastly, you can opt for refinancing your student loans to lower your monthly premiums.
Waiting and saving for a home is another means of gaining stability to acquire a new loan. If all else fails, you can then opt for a conventional loan though they attract higher interest rates compared to the FHA home loans interest rate.
Solving The Problem of “What is a FHA home loans” Advantages and Disadvantages
The table below shows the advantages as well as the downside of FHA loans that acts as a guide towards solving your concerns.
Top 5 Brokers for FHA Loans
The following is a list of FHA home loans reviews on some of the highest rated loan agencies.
- Quicken Loans
This lender is ideal for convenience-oriented borrowers. The largest lender of FHA loans countrywide.
- Rocket mortgage
An app-based FHA lender that makes the borrowing process an easy-to-complete smartphone application process
- New American funding
This lender is the most ideal for refinancers and homebuyers who need an FHA mortgage as well as evaluation through nontraditional criteria for credit.
- Guaranteed rate
Suitable for buyers who do not have enough money for down payments but still want FHA mortgages.
The best option if you are seeking to refinance. They offer cash-out refinancing as well as FHA streamline refinance.
All the above FHA loans brokers act as facilitators between homebuyers and the FHA. Therefore, it is important to assess each one of them to determine the one that will benefit you the most.