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Pros and Cons of FHA Loans

Ready to purchase a home? There are several financing options to consider, including FHA loans. FHA loans are typically easier for borrowers to get approved, but you should weigh FHA loan pros and cons to make the most informed decision. 

What Is an FHA Loan?

An FHA loan is regulated and insured by the U.S Federal Housing Administration and issued by an approved mortgage lender. FHA loans are designed to help low- to moderate-income families achieve homeownership, typically requiring lower minimum credit scores and down payments than conventional mortgage loans.

FHA loans also offer a safety net to lenders. Because the FHA guarantees the loans, there’s less of a risk to lenders if the borrower defaults on the loan. This is why lenders offer FHA loans with more lenient qualifying guidelines. 

According to the FHA’s 2021 Annual Financial Report, the FHA has insurance on more than 7.8 million single-family forward and reverse mortgages. FHA loans are especially popular among first-time homebuyers. 

More than 84% of all FHA loans were for borrowers purchasing their first homes — a record high.

Looking to get approved for a home loan? Total Mortgage can help you buy your first home faster. We have branches across the country. Find a Total Mortgage branch near you.

FHA Loans Pros and Cons Explained 

Like any other type of loan product, there are FHA loan pros and cons and it might not be the right choice for everyone. Before deciding on an FHA loan, it’s important to weigh the benefits and drawbacks.

Advantages and Benefits of FHA loans

FHA Loan Drawbacks

Is an FHA Loan the Right Option for You?

An FHA loan may be the right choice if you have good or fair credit and don’t have the cash reserves to make a large down payment. FHA loans allow people to become homeowners much more quickly than they would be able to with a conventional loan. 

On the other hand, if you have good or excellent credit and a low DTI ratio, you could qualify for a conventional mortgage even if you don’t have the money saved for a 20% down payment. 

Plus, you could put as little as 3% down for some conventional mortgages but borrowers with lower credit scores or higher DTI ratios may need to put down more.

FHA Loans With Total Mortgage

There are many FHA advantages and disadvantages to consider, but the choice you make depends on your financial situation. If you don’t have the best credit history or you don’t have much cash to put down, then an FHA mortgage loan may be an option worth considering.

Total Mortgage currently offers 15, 20, 25, or 30-year fixed-rate FHA mortgages. FHA adjustable-rate mortgages (ARM) are also available.

Apply today for an FHA loan with Total Mortgage and we’ll close your new purchase in 21 days or less.

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