Getting FHA Loans With Bad Credit

[Anna Rupert]

The FHA is a government funded agency, perhaps better known as the
Federal Housing Authority to some of you. This agency was specifically
set-up to help provide loans to people who want to buy property, but
do not have the means to raise funds through conventional lending
methods, such as that of banks. FHA loans for people with bad credit
has both its up and downsides, but they can make it a more simple and
affordable way to own your own home.
One of the most important factors when considering making an
application for an FHA mortgage is that if you have a poor credit
rating you will not be penalized. Conventional lending houses, because
of the risk involved, have made it common practice, to either not
grant loans to people with bad credit, or charge them higher interest
rates. If your mortgage loan is insure through the FHA, you are not
penalized with higher interest rates, down payments are lower, and
flexible terms of credit are available.
Because a loan is insured by the FHA the lender is offered better
interest rates, as well as other more flexible loan terms. This in
itself is beneficial and it means that just because your credit report
does not look so healthy, you will not be denied a loan for a
mortgage.
Working people face many obstacles when they are in the process of
attempting to purchase a home. One of these obstacles is finding cash
to secure the down payment and closing costs. FHA insured mortgages do
not require large down-payments, often as little as 3% is required.
The closing costs are also far cheaper than those of sub-prime loans.
There are many reasons why an FHA insured loan is beneficial, but you
also have to understand that they have a downside. If the lender does
not have the money for the down payment, this can be gifted to them.
Second mortgages are also able to be originated simultaneously with
the application for an FHA loan. Reserves are not needed for tax and
insurance as they are with other mortgages, and if you decide to
refinance your loan, no pre-payment penalties are incurred.
These are the benefits of an FHA insured loan, but bear in mind that
an HUD approved counselor must be consulted prior to making
applications of this nature as the down sides have to be explained to
you also.
You should never apply for any mortgage loan that you will eventually
not be able to afford. Even FHA insured loans are foreclosed on. The
foreclosure rate in the US at present is as high if not higher than it
has ever been, and this is principally being caused by the fact that
people are no longer able to afford to re-pay their mortgages.