For many people, the dream of owning a home may seem to be just a dream. They may not have a large sum of money for a deposit, they may be self-employed, or they may even have a few bumps and bruises on their credit score.
Insurance for Lenders
Individuals with credit issues can still apply for a home loan in Helena, MT if they qualify for an FHA home loan. An FHA loan is a loan that is insured by the Federal Housing Administration or FHA. This insurance means that if the borrower defaults on the loan, the FHA will pay a percentage to the lender, which reduces the lender’s risk.
This insurance is also covered by the borrower in the form of a mortgage premium on the loan. This is added into the monthly payment over the term of the loan. With the low-interest rates, the payments are still very manageable for most qualifying individuals.
Down Payment
One of the advantages of using the FHA home loan option is the very low-down payment required. Instead of the 10-20% required for conventional home loans, borrowers with the FHA program will only need to have 3.5%. Of course, it is possible to put down more, which will mean lower monthly payments and less in interest paid over the term of the loan.
Credit Scores
Most lenders for conventional loans will require a minimum credit score of 620 with the 20% down payment. With the FHA home loan, borrowers with a 580-credit score or above will qualify for the 3.5% down payment.
It is also possible to obtain an FHA loan with a credit score as low as 500, but there will be a minimum down payment of 10% required for any purchases in Helena, MT or across the state.
There are some stipulations for the loans include steady employment for the past two years and the requirement of a property appraisal. In addition, the borrower has to meet other credit requirements, so talking to a lender will be important.
