Housing Loans Demystified: FHA Loan Types and How They Work

Federal Housing Administration (FHA) Loan : Meaning, Working, Types, and  How to get - GeeksforGeeks

When it’s time to buy a home, prospective buyers looking into FHA loans might find that there are a range of different types of loans to choose from. It is important to know the differences between the types of loans and how they work so that buyers can choose the right ones for their needs. Some of the most common FHA loans today include the following. 

Fixed or Adjustable-Rate Loans

The main types of FHA loans are fixed or adjustable-rate mortgages. A fixed-rate loan has a fixed interest rate for the life of the loan, so the monthly payments won’t change even if mortgage rates increase. An adjustable-rate loan will adjust based on market rates, which means the mortgage payments can increase or decrease over time. Both are available in different lengths, with the most common being the 30-year mortgage. Buyers can also choose a shorter mortgage if they’d like to pay off the house faster. 

One-Time Close Construction Loans

Those who want to build their own home may consider a one-time close construction loan. This allows the buyer to purchase the land, fund the construction, and pay for the home itself with a single loan. There are many benefits to going this route compared to other ways to fund a construction mortgage, including easier qualifications. It also has only a single closing, so costs can be reduced compared to a more conventional loan. 

Jumbo Loans

There are limits on how much can be loaned through a conventional loan, so when someone needs to purchase a more expensive home, a jumbo loan is needed. There are FHA jumbo loans available, but it is not easy to qualify for them. Prospective buyers will want to make sure they have enough saved for a large down payment and an excellent credit score before considering one of these mortgages. 

Rehab Mortgages

Ready to tackle a fixer-upper? Prospective homeowners who want to purchase a less expensive home they can fix up may want to take a look at the FHA rehab mortgages. They’ll be able to get a mortgage that covers not only the cost of the home but the cost of major repairs that are needed, too. This can be used to cover most major repairs that a home might need, so home buyers can save money on the home of their dreams and fix it up to meet their needs better. 

Energy-Efficient Mortgages

With this program, prospective buyers can lower their utility bills in their new home. It can also be obtained for existing homes for those who want to make their home more energy-efficient. This is an additional mortgage that can be obtained to cover the cost of energy-efficient improvements that buyers want to add onto their home. Those who are buying a home can have this added to their FHA mortgage, while those who already have a home can include it when they refinance their current mortgage. 

If you’re interested in getting an FHA loan to buy a home, make sure you talk to the lender about your needs. They’ll help you go through the options available to find the right one for you. Once you are pre-approved for an FHA loan, you can start looking for the perfect home to buy.