FHA loans are a great way for first-time home buyers to get a mortgage. Instead of going through the process of qualifying for a conventional loan, they qualify through the Home Equity Loan program. This gives them access to a portion of the appraised value of their home, or equity in their home, based on their down payment and credit score.
While there are some restrictions with the FHA loan, for a first-time home buyer, it is a great option to get a mortgage. Before we look at the restrictions, let’s take a look at the benefits of the FHA mortgage.
What Does An FHA Mortgage Include
- A lower interest rate: The lender will offer you a lower interest rate, typically a rate that’s between one-half and two percentage point below the current market rate. –
- Certain insurance requirements: The lender will set aside a certain amount of money to pay for all of the repair issues that arise with your home. This amount is based on your home’s value and how the neighborhood performs in general.
- A down payment assistance program: This can be up to $10,000, paid as a cash grant that you can use in conjunction with your mortgage.
- Home appraisal: The lender will pay for an appraisal of your home, which is another expense, but one that helps ensure that the loan amount is accurate.
- Closing costs: The closing costs will vary depending on your specific lender.
- Mortgage insurance: Your lender will have to pay a portion of the loan amount to the mortgage insurance company, so they can reduce the interest rate.
- Loan term: The loan term is normally between 15 and 30 years and has very low interest rates. Many Maine FHA Mortgage have a 5-year 0% interest rate, followed by a slightly higher interest rate for the remaining years.
FHA Loan Withdrawal Restrictions
If you are a first-time home buyer who is buying a home that you currently own, you can withdraw your loan from the loan commitment. This means that you can cancel the contract with your lender, which means you can walk away from the deal without paying anything.
If you are in bankruptcy: If you are in bankruptcy, you must withdraw all of your loans, including FHA. – If the home goes into foreclosure: You can only withdraw your loan if you have sold the home and there is no contract or agreement between you and the new owner.
If you have missed mortgage payments: You have to have missed mortgage payments before withdrawing your loan. – If you damage your home: You have to have damaged your home in order to withdraw your loan. But, you can repair the damage and then withdraw your loan.
If you default on a home equity loan: If you default on a home equity loan, you can withdraw your FHA loan, as long as you have not damaged the home or damaged the land under the house.
The Federal Housing Administration is known for providing low-interest loans for home owners. This is a good way for first-time home buyers to get a mortgage, since they don’t have much of a down payment. But remember that there are some restrictions on this loan and what you can buy with it. It is important to shop around and compare loan rates to get the best deal on a mortgage. Click here to get advice from the experts.