An FHA loan is a fantastic alternative option for potential home buyers that can’t meet the often pressing high standards of major banks, particularly since 2009. Potential lenders have all sorts of questions about FHA loans and rates. Considering the scale of their purchase, the questions are completely fair.
One specific question revolves around the purpose of FHA. FHA Mortgage Rates in Portage MI are separate from the banks, and the FHA acts as assistance- a way to connect a gap in receiving a loan. Some myths of FHA abound about their role and purpose.
FHA is Not a Lender
FHA is not lending the money at all. It is a bank that is lending the money. FHA is providing the “backing” of that respective loan. In essence, FHA acts as insurance. The bank is skeptical about the loan, and may not offer it on their own terms. But, FHA is filling in an insurance-oriented role to “allow” the loan to go through in what would otherwise by a high-risk client.
There are no Universal Rates
FHA Mortgage Rates in Portage MI vary- by a lot. Despite the fact that FHA is a large institution that seeks to help people, the rates are not necessarily consistent. They vary based on the relationship with the bank. For example, one bank may be especially adverse to high-risk loans, sop the rates are higher. They are willing to work FHA, but at a higher amount. This may run contrary to other banks.
There is No “No Down Payment” FHA
Is it possibly to receive an FHA loan without a down payment? Anything is possible, but it is hardly likely. The down payment minimum is 3.5%, but many bank lenders who work FHA will want close to 5%. Visit Kalamazoo Mortgage for more specific rate determinations. A bank loan outside FHA may seek 10% or 15%, so the 5% standard is effectively half of what it could be. It could be the difference of needing $10,000 or $20,000 upfront.
Rates vary. FHA rules are supportive but realistic. Down payments are expected. FHA is a wonderful option for buyers, but there are still expectations that need to be met. Buyers will find them to be far more borrower-friendly through the FHA.