If you want to buy a home for yourself for the first time but don’t have the money to make 10-20% down payment, you can apply for an FHA home mortgage loan.

The FHA or Federal Housing Administration wants to promote home ownership, so it insures home mortgage loan for the lenders. The borrower can make a down payment as low as 3% of the loan amount. It also helps the buyers by providing finances towards closing costs and mortgage insurance. If the borrower becomes a defaulter, the lender can get refund from the FHA. As it lowers the risk of the lenders, they are ready to approve more loans.

Eligibility criteria to qualify for an FHA loan

In order to get qualified for an FHA loan you need to fulfill the criteria mentioned below:

• Debt-to-income ratio: This ratio comprises of front-end ratio and back-end ratio. Your monthly mortgage payment (including interest, home owner’s insurance ad property tax), compared to your gross monthly income gives the front-end ratio. The monthly mortgage payment should not exceed 31% of your gross monthly income. The monthly payment you make towards your debt liabilities (including new mortgage payments) compared to your gross monthly income gives the back-end ratio. This should not be more than 43%.

• Good credit score: You should have a good credit score to get qualified for this type of loan.

• Minimum down payment: You should be able to make a minimum down payment that is at least 3% of the total loan amount.

Advantages of an FHA loan

The benefits of the FHA loan are mentioned below:

• Low down payment: You can get this loan by paying a very low down payment. Instead of the conventional 20% down payment, you can make 3% -3.5% down payment of the total loan amount and be eligible to get approved for the loan. You can also take this down payment money from your family members, charitable organization or your employer as a gift. You will not get this facility in other loan programs.

• Reasonable credit score: You don’t need a perfect credit score to get yourself approved for this loan. Even, if in the past you had credit problem like, bankruptcy, you will still be eligible to get this loan.

• Costs less: In comparison to the conventional loans, the interest rates are much reasonable in this type of loan as this loan is insured by the Federal government.

• Easier to qualify: As your loan is getting insured by the Federal government, the lenders make the loan terms and conditions more affordable to you, so that you will get qualified easily.

If you don’t have enough money, but still have the dream to own a home, you can apply for an FHA home mortgage loan and get your dream fulfilled.

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