The Federal Housing Administration, better known as FHA, guaranty loans used by first time buyers of their homes, in the event that they can’t afford a down payment or do not qualify for a mortgage with a conventional bank. FHA guarantees the lender that if the borrower defaults on the loan, the lender will then pay back the principal and the interest. This type of loan is available to almost anyone who applies, regardless of credit history, and has a job.
FHA loans are an excellent choice for many people. If you have a bad credit rating, your chances of getting a loan approved are slim to none, and your chances of finding a competitive mortgage loan are even slimmer. If you do find a loan approved, you may not be able to afford it. Most mortgage lenders require borrowers to have a decent to great credit history.
A common mistake people make when they apply for a FHA loan is putting down a large down payment. Usually you can only afford a small down payment, but this does not mean you should go cheap. Shop around and compare prices between several different mortgage lenders. When choosing a lender, make sure you select one that offers competitive interest rates. If a lender has low down payment requirements, it means you may pay more in the long run for your loan.
Always shop for the best interest rate possible. If you currently make regular payments on your home loan, use those payments as a guide to finding the lender with the lowest rate. Also, look for any fees associated with the loan and consider how much you would have to pay if those fees were not there. The most important factor in choosing the right lender is getting a loan that you can afford to pay off every month. Many people get into trouble by taking out loans that cannot be repaid.
Once you’ve found a lender who can approve your FHA loan, remember to always pay on time. If you are behind on your mortgage payments, talk to your lender before you purchase your home. Find out what their policy is if you fall behind. Depending on when you purchased your home, you may not be able to qualify for a loan modification if you do fall behind.
Try not to put yourself in a position where you will need to sell your home during a foreclosure. It is possible to work with your lender to try to keep your home. In many cases, your lender can agree to stop the foreclosure and allow you to sell your home. But, it may be wise to wait until after your foreclosure is over and no longer looming over your head. This way you can find a buyer and hopefully avoid having your home foreclosed upon.
If you have bad credit, you still have options. Check with your local bank and see if they have any special programs for homebuyers with bad credit. You may be required to provide a little more paperwork with these programs, but you could be approved. Also, you can look into getting a federal loan, as there are some financial agencies that specialize in FHA loans.
When searching for a lender to give you an FHA loan, be sure to choose one that offers you a reasonable interest rate. Remember, the interest rate you receive is figured into your monthly payment. It is also important to choose a company who will honor their loan in the event that you become delinquent. You should also shop around to find the best deal. Many lenders will offer lower interest rates if you put down a down payment or use a larger down payment.