There are various pros and cons to every type of mortgage there is in the market. That is why, it is necessary for individuals to know the details of their loan before writing in a commitment. There are three types of loan that are gaining popularity nowadays, but in this article only one will be discussed and this is the most popular amongst the three.
We’re talking about the Federal Housing Administration (FHA) mortgage. For the past years, Federal Housing Administration had been claiming that they had backed more than 35 million loans in the past decades. Indeed, this seemingly growing popularity of the FHA loan is brought about by expectant first-time borrowers, those looking to refinance a loan that had been adjusted into a fixed rate terms, and those homeowners who have an outstanding to subprime credit standing. This is unlike VA loans that cash out money; instead, this is a government-oriented loan, with a fixed or adjustable mortgage rate, plus a safety net available once a homeowner cannot anymore manage to pay for the house.
FHA loans are available to borrowers who have a mid to high debt-to-income ratio. These homeowners, once in the program, can qualify for a higher loan. And a higher debt-to-income ratio would mean a higher portion of one’s money affixed to paying mortgages and not on spending on other needs.
This type of loan gives more credit to the debt credibility of the borrower and any approval decision is not only on machine generated reports. Each application is individually looked at and reviewed, so that past mishaps can be taken in consideration to the bad credit standing of an individual.
One benefit of an FHA loan is its low initial payment. Compared to the conventional loan, this type of loan only requires the borrower a 3.5 % initial payment. Another advantage of this loan is it has no standard credit score. One would not be discriminated upon even if he has a bad credit reputation. This is because, lenders of FHA loans still considered other factors that underlies the credit score. But one should also realize that some lenders of this loan have certain guidelines that they use in evaluating homeowners for a refinancing.
If one is an outstanding debtor and never experienced loan default in the credit history, then this is the best suited type of refinancing. FHA mortgage is also the best fit type of loan if one is looking for a refinancing without the big chunk of down payment.
About the Author:
I am Brian Soco a blogger at www.leaderscorpfinancial.com. Our company is located at Rancho Cucamonga California, USA. We provide mortgage services intended for purchasing or refinancing a house at the lowest mortgage rates around.