The Federal Housing Administration or otherwise known as FDA has been very helpful to those who need a guarantor especially for someone whose financial history isn’t that commendable – he can easily get a bad credit FHA home loan if he fails to obtain a regular home loan from any lending institution. We can’t deny the fact that a bad credit rating won’t do us any good especially when it comes to earning the trust of other people who might be able to lend us monetary help. Thanks to FHA, it is now relatively easy to get a home loan even when you have a bad credit score. But like any other lending programs and schemes out there, this is not for everybody though.So what really is an FHA loan and who can avail an FHA guarantee?Simply put, an FHA loan is a home mortgage that is insured by the FHA – meaning, if in case the borrower defaults on his home loan, the FHA will have to pay for him. This allows the borrower to borrow a large amount of money from a lender since he’s got the backing of FHA. But as stated above, not everybody can avail of this guarantee. To qualify for this program, you will have to make sure that your debt to income ratio is reasonable enough – it should be better than 29:41. A decent credit rating is also important though it is not required as long as you can prove that you will be a better borrower this time.What’s so great about an FHA guaranteed loan is the fact that the program could lower down your down payment to as low as 3%. This is very helpful to most borrowers since it would stop them from taking out instant money from their own pockets just to start out on a loan.But of course, all of these advantages don’t come free but then again, nothing is free in this world anymore. In the case of an FHA guarantee, the borrower will have to pay FHA a borrower’s fee as well as an MIP or mortgage insurance premium of 2.25% aside from a small ongoing fee for each monthly payment that he makes for the loan. But if you sum up all these fees, it is actually nothing compared to the fact that you were able to avail one of these loans for bad credit because you have the FHA guarantee.
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