Ready to buy your first home? Working with limited income or money for a down payment? A government-insured Federal Housing Administration (FHA) home loan may be the right solution for you. Since 1934, FHA loans have been helping people buy homes.
- A low, 3.5% down payment.
- Down payment funds can be a gift from a relative.
- Government backed loan.
- Available with fixed and adjustable-rate mortgages.
- Flexible income and credit requirements.
- Low closing costs.
- Sellers may contribute up to 6% of the closing costs and prepaid items.
Some FHA home loans have a loan value cap based on location, but keep in mind that the typical FHA candidate already has financial limits. The program has no minimum credit score, although the lender might, and the chances of approval get better as the scores get higher.
Both options offer the same interest rate stability, but the 15-year term has higher monthly payments, giving you a faster way to build up home equity. You can use this higher equity as a down payment when you move to your next house. Some FHA loans have loan amount caps and vary depending on location.