If you want to know why you should opt for an FHA loan in 2019, listed below are some of the many benefits that this kind of mortgage can offer.
Lower Down Payment and Credit Score Requirements
The requirements for the credit score and down payments are lower for FHA mortgages compared to conventional loans. Applicants can easily qualify for an FHA loan credit scores with a minimum credit score of 580 and a down payment of only 3.5%, as per HUD.
Lower FHA Mortgage Rates
The rate of an FHA mortgage is generally lower than the rates on conforming loans. Borrowers of FHA loans who have a credit score of 660 will usually qualify for the exact same interest rate as borrowers of conventional loans who have a credit score of 740.
For FHA loans, the sellers can pay up to 6% of the amount of the loan to cover the closing costs of the buyers. Meanwhile, sellers can pay only as much as 3% for conventional loans. This is a huge advantage for many homebuyers. Many of them, especially those who are buying a house for the first time, can save enough for their down payment, however, they have nothing else after that. With an FHA loan Myrtle Beach, the sellers can contribute so much more to the closing costs.
They Are Assumable
Another advantage of FHA loans over conventional loans is that they are assumable. By the time you have to sell, buyers will be able to take over the existing FHA loans of the sellers rather than getting a new mortgage at the mortgage rate during that time. This can be very beneficial in an increasing rate environment. However, assuming an FHA loan is not always that simple. Although buyers need to meet all of the regular mortgage requirements, they might have a much bigger down payment based on the equity of the seller.
Since an FHA loan does not have a strict standard compared to a conventional loan, it needs two types of mortgage insurance premiums. The first one needs to be paid upfront and in full amount , or it can be financed into a mortgage, while the other one is a monthly payment. Additionally, FHA loans demand that the house fulfill certain conditions and should be appraised by an appraiser that is FHA approved.
Upfront mortgage insurance premium or UFMIP – it is a one-time monthly premium payment that is paid upfront. This means FHA loan borrowers is going to pay a premium of 1.75 percent of the home loan, regardless of what their credit score is.
Annual MIP – the annual premium is a monthly charge that would be figured into the mortgage payment. The mortgage insurance premium cost is going to be percentage of the total amount of the loan. It will be based on the loan to value ratio, loan duration and loan size of the borrower.
Call MB Mortgage Pros if you want to know more about FHA loans.
MB Mortgage Pros
630 Chestnut Road
Myrtle Beach, SC 29572