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Benefits of a FHA Loan

  • It is easier to qualify for a FHA   loan than it is for a traditional California mortgage loan from your average lender. Since the FHA does not directly loan you the money, you have to qualify with a lender that funds FHA loans . It is easier to qualify because the FHA guarantees your California mortgage loan , which means that they promise the lender that if you skip a mortgage loan payment, go into default, or they are forced to foreclose on the property, that the lender will get their money back. The FHA guarantees a percentage of the mortgage loan , which they pay directly to the lender in the case of foreclosure. So, the lender has nothing to lose by extending credit for a California mortgage loan to a borrower who chooses an FHA loan .

  • You do not have to have perfect credit to refinance with a California FHA loan . The FHA requires certain standards order to offer you a mortgage loan guarantee, but the lender is still guaranteed their money in case of foreclosure , so they are more likely to fund the California mortgage loan even if the borrower's credit is not ideal.

  • You can have no down payment or a very low down payment, and still get a mortgage loan . Most traditional lenders require a minimum down payment, which preferably is around 20% of the purchase price of the home. FHA loans only require 3.5%, and this required portion can be a gift to you. Many lenders don't allow gifted funds to be used for down payments on a mortgage loan , but a FHA loan would allow you to do so. This means that you can borrow the down payment from a friend or relative. If you are refinancing, you would be able to take more cash out from your home, or refinance sooner, even if you have a very small amount of equity built up in your home.

  • You may get a much lower interest rate on your refinance mortgage loan . FHA loans can offer much better loan terms than traditional mortgage loans because the mortgage loan are guaranteed by the federal government, so there is almost no risk involved. Because of the guarantee, lenders are more secure with the mortgage loan , and can offer lower long-term fixed interest rates and fewer points.

  • The FHA will stand by you in case of an emergency. Most lenders help you get your mortgage loan , and then leave you on your own. Your mortgage loan may even be sold to other companies, and you would never deal with your original lender again. The FHA stays with you for the life of your mortgage loan , and they can help you if you get in trouble. If for any reason you get to the point of default or foreclosure on your home, you should contact the FHA immediately. The FHA has programs that can help you retain ownership of your home in times of crisis.

These are just some of the many benefits you would receive if you refinance your home with a California FHA loan . Keep in mind that because the FHA does allow you to put such a small percentage down on your mortgage loan or take out a lot of cash when you refinance, you are required to carry mortgage loan  insurance on your home until the equity in your property has built up to 20% or more.

A FHA loan can allow you to include the costs of your home improvements in your loan. HUD's 203 (k) program allows you to purchase, or refinance, a home that needs improvements and include all repair and improvement costs in the loan.

FHA loans can even help you to make your home more energy-efficient. The FHA recognizes that with a more energy-efficient home, the homeowner can afford to pay a higher mortgage loan ; therefore, the FHA can also include these types of repairs in the original mortgage loan also.