FHA loans exist to help potential homebuyers make a down payment on a home they couldn’t otherwise afford. As with most government programs, FHA loans Chicago come with a lot of rules, stipulations, and often misunderstood terms of usage. Here are four facts about these loans that may help you to come to a more informed decision involvng them.
1. It’s a Government Program, but the Government Doesn’t Lend the Money
Many people assume the FHA loan funds come from the government. That’s not how it works. The government only insures the loan you take out from a mortgage lender. That protects the lender because they’re covered for their potential loss. It also means you still need to show care and due diligence when seeking out a lender.
2. Individual Lenders Can Still Apply Their Own Rules
FHA loans come with many stipulations. The Federal Housing Authority only wants qualified people to take advantage of the program. Don’t worry, “qualified” includes just about everybody in this case. However, individual mortgage lenders extend the loan, and set their own rules as well.
For you, that means certain lenders can still deny you a loan, while others will most certainly work with you no matter what. Weigh your options. If one lender turns you down, it doesn’t mean they all will. You may just not meet a specific lender’s requirements.
3. FHA Loans Can Cover More than Just a Down Payment
FHA loans can do more than cover a chunk of the down payment on a new home. It’s also not just for first-time homebuyers. FHA loans can cover a few other things.
- A percentage of the closing costs
- Some home improvements (203k program)
- Adding energy efficient appliances and upgrades (EEM program)
There’s a lot you can do with an FHA loan, depending on your personal situation and finances. It’s worth it to look into all possible advantages for an FHA loan Chicago mortgage lenders can offer.
4. FHA Loans Can Have a Surprising Amount of Flexibility
FHA loans are not just one type of loan. In fact, mortgage lenders can offer them in a wide variety of configurations. For example, you can choose between fixed and adjustable rate options. FHA loans go far further than that in terms of flexibility.
For example, there are FHA loans for
- people facing foreclosure,
- people temporarily out of work,
- for victims of natural disasters.
As with most government programs, things change all the time. It helps to stay aware of the current state of FHA loans. Don’t go by old information.
Remember, mortgage lenders have a lot of power over how your FHA loan will work. Make sure you choose a mortgage lender willing to work with you and explain all the aspects of an FHA loan that will make your life easier.