Home loans from the Federal Housing Authority have been around for decades. It is in the 1930s when the concept of FHA loans was introduced in the United States. Over the years, it continued to be a staple service of the agency, albeit for only a small portion of the public.
The thing with FHA loans back then is that they are, at best, a niche option for low-income buyers. But then, 2008’s market crash happened – and that’s when the tables turned. An FHA 223a7 loan has many benefits, but you have to be knowledgeable on it if you want to maximize its benefits. So, here are some basic facts about FHA loans you should know:
The Lender’s Not the Government
On first hearing, it would seem that FHA loans are something you take from the government – but not quite. Yes, you transact with the FHA, but the agency is not your lender. Instead, what it does is that the government agency insures the amount you have loaned. In effect, the private lender from which you source the funds has an extra layer of protection in case you fail to pay up.
Down Payments Tend to be Lower
Now, because of this added security, lenders are more open in agreeing to lower down payment figures. It is a misconception to think you need around 20% of the property value for the initial payment. Know that the government has your back in this loan, so you can make the purchase for as low as 3.5% down on a detached house or condominium unit.
Renovations are Covered
According to Bonneville Multifamily Capital, FHA loans cover more than just your typical house purchase. You can also apply for it when you’re planning a renovation. These repairs and home improvement projects are considered “built in” when you sign the loan.
FHA loans are a good option for when you want to buy a house without many cash at hand. Understand its fundamentals before signing an agreement to ensure you’re making the right call.
