This is a confusing question given all the media reports about today’s housing market. No matter where you look (TV, news papers, radio, magazine, internet, etc) there are experts saying you have to have excellent credit and a big down payment to even get approved for a mortgage.
These stories are FALSE. No money down loans did not go away as the mortgage crisis got worse. The Federal Housing Administration (FHA) requires that you put down between 2.25-3% as a down payment (depends on what state and what purchase price you’re looking at).
But this doesn’t mean YOU have to pay that down payment, it can come from a down payment assistance program meaning you can still get into a FHA mortgage with nothing down!
You will need a decent credit score (your 520 score will not fly this time anymore with this loan) so you should be at least over 580 to be considered for this program. This loan is perfect for people who have always paid their bills but haven’t been able to save a lot of money due to gas and food prices.
FHA loans are a popular option given the low down payment required and they are offered through your local St. Louis mortgage lending institutions. They are also popular because the lenders don’t have the risk of future losses should the loans fall delinquent, the FHA insures 100% of the loans.
So how is this different from other loans? Conforming mortgages require that you put at least 5% down which can not come from a down payment assistance program.
In addition, the monthly private mortgage payment (PMI) on a FHA loan is a lot cheaper than on a conforming mortgage.
Here’s a quick history of the FHA, it was created in 1934 to help accelerate home ownership after the Great Depression. Military personnel returning home after WWII took advantage of these programs which really helped boost the economy during the 1940’s.
So why don’t a lot of people know about these FHA mortgages if they’ve been around for 70+ years? They aren’t new or fresh that’s why, the sub-prime loans that are new and fresh are getting all the coverage in the St. Louis real estate market.
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