A Federal Housing Administration loan is suited to homebuyers with low to moderate incomes. As a result, an FHA loan has much to offer a first-time buyer with a dream of homeownership. Here are just a few of the many benefits offered by this type of loan. 

Why You Should Consider a Loan From the FHA

1. Small Down Payments

With a conventional home loan, most buyers make a down payment ranging from 5% to 20% of the total costs, depending on their credit score. With an FHA loan, a down payment of as little as 3.5% can be sufficient for securing a home. 

2. Poor Credit Scores Can Still Get Approved

When applying for a conventional mortgage, lenders want to see a credit score that’s at least a 620—but preferably higher. When the FHA backs a mortgage, the credit score requirement is loosened.

In some cases, it may be possible to secure financing with a credit score as low as 500, provided the down payment is sufficient. That means that even people with bankruptcies in the past may be able to buy a home. 

3. Help With Closing Costs

Along with the down payment, homebuyers must also come up with the money for closing costs. While conventional mortgages do allow some coverage for closing costs, this typically only amounts to about 3%. With an FHA loan, buyers can use up to 6% of the loan to cover the closing. 

4. Loans Can Be “Assumed” by a New Buyer

If circumstances change and you’re unable to continue paying your mortgage, there are other options. FHA loans can be “assumed” by a new buyer, meaning the existing loan can be taken over instead of the buyer applying for a new mortgage.

This is also beneficial if you decide to sell your home at some point before the mortgage is paid off, as buyers may be attracted by the lower rate compared to other properties. 

If you need more information about this or other types of loans, Kevin Currier - Loan Officer at CMG Financial - NMLS#1550600 is here to provide answers. If you’re interested in buying a home in Chattanooga, TN, he’ll help you choose the best loan product for your needs—from conventional to FHA and USDA options. Visit the website for more information or call (423) 991-0095 to schedule an appointment. Assistance on nights and weekends is often available, and this trusted loan officer is quick to respond to all queries.