If you do not qualify for a traditional mortgage, or want to buy a house in an under served area (where it may be more difficult to obtain a traditional mortgage), look into an FHA (Federal Housing Administration) home loan. FHA loans are offered through HUD, or the Department of Housing and Urban Development. FHA loans are a special kind of insured loan that allows lenders to approve candidates who would otherwise not be eligible for a mortgage; in turn, they also offer more attractive terms to the borrower.
With an FHA home loan, your down payment (usually at least 10 percent of the price of the house) can be lowered to as little as 3 percent. Also, many closing costs–which can add up to as much as 3 percent of the value of the house–may be financed, as well. Currently, FHA insures about 7 million loans worth almost 400 billion dollars. They are credited with saving many people from foreclosure during the Great Depression, as well as helping servicemen achieve home ownership in the 1940s and ?50s.
Who is eligible for an FHA home loan?
First, you must be the owner/occupant of the house in question–it cannot be an investment property. You must meet specific debt-to-income ratios, and have a good credit record. People with a history of paying bills on time are the best candidates. FHA loans are designed for those with low to moderate income. Therefore, there are limits on how much they will insure.
FHA Home Loans–Your Key to Home Ownership
You can apply for an FHA home loan through any FHA-approved mortgage company. You will need to have the following information handy: your Social Security number, address, and employment/income history, as well as checking and savings account numbers. You will also need to supply information about any loans you currently have open, and an estimate of your furniture and other personal property.