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.
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.
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.