FHA loans are getting popular than conventional ones among rookies and first-time home buyers in Bergen County — and there’s a logical reason behind that.
1. Federal Government Backs You Up
FHA loans in Bergen County are insured by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD).
In short, the U.S. Government insures this kind of loan. So, you have all the Government backing that you need— and for starters and first-time home-buyers, this means a lot of things already.
For one, FHA loans can enable you to pass through some rigid demands that conventional loans in Bergen Country may require, such as a high credit score.
Likewise, because the Federal covers FHA loans, you also get more protection in times of calamities, disasters, typhoons, and even the COVID-19 Pandemic.
The CARES Act, which the U.S. Congress passed last March 27, for instance, granted a mortgage relief or forbearance to FHA loan borrowers during the Pandemic.
2. You Don’t Need an A+ Credit Score to Qualify
A credit score is a measure of your creditworthiness— a determining factor in whether your loan will be approved or not.
And for young first-time home buyers, achieving a high credit score can be a little challenging.
A 2019 report made by Experian disclosed that millennials with ages 20 to 29 have the lowest credit score in the U.S. as far as age groups are concerned.
With an average credit score of 662, which is 42 points above the minimum credit score required by banks, young millennials have a lower chance of getting a mortgage, and a conventional loan at that.
But, thanks to FHA, millennials and non-millennials alike who have a minimum credit score of 580 can now obtain FHA loans in Bergen County.
3. Down Payment is Lower for FHA Loans in Bergen County
The Down Payment for FHA Loans in Bergen County can be as low as 3.5%. That is if you meet the minimum Credit Score requirement of 580.
And even if credit score fell short and you got a mark within the 500 to 579 range, the down payment for your FHA Loan will only increase to 10% of the mortgage loan.
Considering the 20% down payment requirement by conventional loans, FHA loans are still less costly compared with private mortgage loans.
4. Insurance Premiums are Fixed Unlike Conventional Loans
Mortgage insurance premiums (MIP) are imposed by the lenders to the borrowers to protect themselves from the risk of non-payment by the debtors.
Typically, the amount of insurance premium one pays for his Bergen County loans depends on his credit score. The higher the credit score the borrower has, the lower the insurance premium he needs to pay.
So, if you’re someone with a low credit score, chances are you’ll be paying more insurance premiums for your mortgage.
Changes in insurance premium according to credit ratings, however, are not an issue for FHA Loans in Bergen County.
That’s because regardless of what your credit score is, you’ll only pay a fixed FHA MIP throughout the life of the loan.
Some people find the fixed MIP disadvantageous in the long run. Still, for starters and first-time home buyers, the fixed FHA MIP is already a great deal while trying to improve their credit scores.
5. Your Can Receive the Down Payment on Your Wedding Day
Yes, that’s right. Your down payment can be waiting around the corner.
Another advantage of getting FHA Loans instead of Conventional Loans in Bergen County is the restriction as to who can give the down payment as a gift.
Most Conventional Loans will only allow immediate and soon-to-be family members as donors.
With FHA Loans, however, this is not the case. Your boss and even your friends can give your mortgage down payment as a gift.
So, if you’re friendly and lucky enough, you can have the gift of new life and home on your wedding day.
But, of course, these are subject to FHA guidelines and regulations. So, make sure to ask your mortgage broker when accepting and receiving down payments as a gift.
Based on the above, millennials, and first-time home buyers are indeed the first ones to benefit from FHA loans in Bergen County.
But, the Federal can only do so much for us. The responsibility of being a mature adult who pays his mortgage loan on time still rests on the borrowers.