Is an FHA Loan right for you?
Are you a prospective Illinois homebuyer that has been sitting on the sidelines waiting for home prices to drop or waiting for additional down payment funds? It may be time to take a serious look at buying your first home in the greater Chicago area. If you have not saved funds for a down payment that are equal to 10% or more of your target sales price, an FHA mortgage loan may be perfect for you.
There are many advantages to FHA mortgage financing. One of the main benefits is that FHA only requires a 3.5% down payment and, that down payment can be entirely gifted from family member or relative. In addition, FHA allows for less than perfect credit. While many conventional loans require credit scores of 680 or higher, FHA does not have a minimum credit score. However, most mortgage lenders impose a minimum credit score of 640 for FHA mortgage approval.
There are some disadvantages to FHA that should be considered as well. The upfront mortgage insurance (UFMI) is very expensive at 1.75% of the loan amount. This amount can be financed into your mortgage loan. In addition FHA requires monthly mortgage insurance as well which, as of June 2013, can never be cancelled throughout the life of the loan. This represents a significant increase in costs for an FHA loan as compared to a conventional mortgage loan. But, if you are like most home owners, saving that initial $20,000 to $30,000 for a home that costs $200,000 to $300,000 can be a very difficult task.
To determine if an FHA mortgage is right for you, contact us below or at 708-531-8388.