While more than half of all homebuyers apply for Fannie Mae or Freddie Mac-type mortgage loans to finance their property purchases, the truth is that those standards are outside of many people’s grasp: conforming mortgage loans (i.e., Fannie Mae or Freddie Mac) require an average downpayment of 20% of the home’s purchase price.
And that can be just too steep for many people.
There’s another alternative for those who cannot manage the 20%: you can finance your home purchase through FHA (Federal Housing Administration) mortgage loans.
The FHA is a government agency that was formed back in the 1930s, back at a time when mortgage loans were unavailable to anyone who wasn’t already well-to-do. Banks wanted 50% downpayments, and most of them were unwilling to loan mortgage money for more than a five-year term.
The US government knew even then that home ownership would help stabilize the economy, so it came up with the world’s first mortgage insurance company: if mortgage loans could meet certain set standards (standards that were, in truth, far more lenient than those of any existing bank), then the banks issuing those loans would be insured against any loan defaults.
The FHA today is the world’s largest mortgage insurer, and one in four buyers is using the FHA program to buy their home.
The program allows downpayments of as little as 3.5% on a home. It’s available in all 50 states and its mortgage rates are the most accessible of any on the market today.
There are other good reasons to apply for an FHA mortgage. Conforming mortgages require excellent credit scores; the FHA gives all borrowers access to the same mortgage rates, no matter what their credit scores are. And real estate agents can negotiate seller concessions of up to six percent as part of the contract. Why is that helpful? Because the seller could pay for closing costs, real estate taxes, and per diem interest charges, so that you’ll need even less cash at your closing.
FHA financing will cost you two premiums:
- The Upfront Mortgage Insurance Premium (UFMIP), which is a small percentage of your loan size. (You don’t have to actually pay this at closing—it’s added to your loan.)
- The monthly mortgage insurance premium (MIP), which is currently around 0.85% annually.
To find out if you (and the property you’re interested in buying in Florida, Georgia, or California) are eligible for an FHA home loan, check with us! At Avrus Financial and Mortgage, we help people find just the right FHA home loan with a downpayment they can afford, and we can help you, too.
Why not ask us how today?
