In the past, FHA loans were often recommended for homebuyers who were looking to lower their interest rates and make a smaller down payment than conventional loans allowed. The FHA makes it easier for lenders to approve loans by offering them insurance against losses if the borrower defaults.
In the current market, however, conventional loans are available with 3 percent down, making them equally attractive, if not more so, for homebuyers.
Through our many regional locations, Blackhawk Bank works with our Southern Wisconsin and Northern Illinois customers individually to determine which loan would work best for their needs.
About the Federal Housing Administration
The Federal Housing Administration (FHA) was formed in 1934 to make more home loans available to consumers following the Great Depression. While lenders were fearful of handing out money to those who could not meet their stringent guidelines, the FHA provided insurance that the banks would be repaid, even if the borrower fell behind. This signaled to lenders that it was safe to offer more loans and different types of loans to the public.
Today, the FHA remains an important player in the mortgage industry for loans on both single-family and multi-family properties. The FHA is self-funded by insurance premiums paid by borrowers, so it is not dependent on taxes or federal subsidies.
What is an FHA loan?
These loans are specifically designed to help first-time homebuyers and those who do not have a ton of cash for closing and down payments. Conventional and FHA loans are currently available with as little as 3 percent down. FHA mortgage loans are typically available to those who do not have perfect credit, allowing more people to recover from past credit mistakes.
One crucial element used to determine your eligibility is your debt-to-income ratio. In the past, FHA mortgage loan rates were usually lower than other loans because they were guaranteed by the government, but in the current market FHA and conventional loan rates are typically the same.
With an FHA mortgage, you will pay a mortgage insurance premium at closing to cover the cost of funding the FHA in case of a default.
How to Apply for a FHA Loan?
In order to apply, you must go through an FHA-approved lender. The application process requires much of the same information as a regular mortgage application, but you should speak with your lender in advance to make sure you have all the paperwork you need in order. You can complete your entire application online and your lender will send it straight to the FHA underwriters to get an answer within a few days.
To learn more about FHA insured loans, contact Blackhawk Bank today. We service mortgage loans of all kinds, including USDA home loan applications and VA home loan applications at our branches in southern Wisconsin and northern Illinois.