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The Basics of an FHA Loan

Posted on June 17, 2016

meetingThinking of buying a home in Fort Walton Beach soon, but worried about the financial elements? Don’t worry; there are several loan types out there that can alleviate some of your concerns.

One such loan is an FHA, or Federal Housing Administration, loan. Requiring a small down payment, these are a wonderful consideration for those who have found the perfect property, but are concerned about the upfront financial costs associated with a traditional mortgage loan.

What exactly is an FHA loan? It is a loan that has been insured by the FHA and provides another level of security and guarantee to your lender. Should you fail to make the required payments, the FHA will step in and pay the lender instead.

So, what are the attractive features to you, the buyer? One, they require a much smaller down payment than most traditional loans, as small as 3.5%. You can also use gifts, like money given to you as a wedding present or from a parent, toward your down payment or even closing costs. Have recently come out of a bankruptcy situation? An FHA loan may be easier for you to acquire.

While these loans can be easier to get, there are a few minimums that have to be met. While there are no income limits, you do need to be able to show you have the means to repay the loan. Debt to income ratio requirements are applicable, as is a credit score rating of a certain amount.

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