Types of FHA Home LoansThe FHA home loan comes in a variety of forms. We'll explain the types of FHA home loans to help you decide which is right for you. Fixed-Rate FHA Home LoanMost FHA loans fall under this category. With a fixed-rate FHA home loan, your interest rate will remain the same for the life of the loan, which is usually 30 years. Fifteen-year fixed-rate mortgages also are available. A fixed rate mortgage has several benefits. For one, your monthly payment will stay the same for the life of your loan. You will know exactly how much your payment is each month, which can help you budget. Secondly, a fixed-rate FHA home loan protects you against interest rate increases and fluctuations. You lock in a rate that stays consistent, regardless of what the market rate is doing. Adjustable-Rate FHA Home LoanSometimes when you first buy a home, your finances are a little tight at the beginning of the mortgage. If that is the case, you probably want an FHA home loan that will give you the lowest monthly payments possible at the beginning of the loan. An adjustable-rate FHA home loan can give you low initial payments, but these payments only last for a fixed amount of time before they begin to fluctuate. An adjustable-rate FHA home loan will be tied to the market interest rate, which means your payments will rise and fall according to the lending climate. With an adjustable-rate FHA home loan, there is a 1-2% maximum for how much your interest rate may rise per year. The FHA home loan also guarantees no more than a 5-6% maximum interest rate change over the life of the loan. An adjustable-rate mortgage might enable you to afford more house because your initial payments and interest rates will be lower. |
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Purchase/Rehabilitation FHA Home LoanThis type of loan might be of interest to you if the home you intend to buy is a "fixer-upper" that will require a substantial amount of work. The SF Rehabilitation Loan Program is an FHA home loan specifically designed for the repair and rehabilitation of single-family homes. This program lets homebuyers get one mortgage that includes the cost of repairs. The amount of your FHA home loan will then be based on the anticipated value of the home when the repairs are completed. The advantage of the purchase/rehabilitation FHA home loan is that you can get a mortgage that will pay for the cost of your repairs all in the same loan. FHA Home Loan vs. Subprime LoanSome people confuse FHA home loans with subprime loans, but they differ substantially. First, the interest rates on subprime loans are much higher because they are not insured by the federal government. Secondly, subprime loans tend to be adjustable-rate mortgages, meaning your rates and monthly payments could fluctuate wildly. Finally, most subprime loans come with a hefty prepayment penalty that will make it difficult to refinance the loan in the future. Check out our FAQ section if you have any questions. |
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