For any first-time homebuyer, choosing between loan options may seem difficult. Whether it’s an FHA or conventional loan, there are many benefits for the borrower to consider. For young homebuyers with imperfect credit scores, however, a mortgage insured by the Federal Housing Administration (FHA) may be a better fit. Let’s take a closer look at the advantages of choosing an FHA loan to see if it’s right for you. 

Basically, FHA loans are government-insured finances that are sourced through private lenders. This means the government does not actually pay out the loan, but rather insures it, which significantly reduces risk for lenders. As a result, mortgage lenders offering this type of loan are much more likely to approve a borrower with a lower credit score—a feature that sometimes prevents first-time buyers from considering the home buying process, but really shouldn’t! In fact, FHA loans make it possible for the millennial homebuyer to jump into the housing market. Last year, its increasing popularity encouraged 41 percent of female millennial homebuyers to buy a home, along with 38 percent of millennial men (Ellie Mae Millennial Tracker).

Although an FHA loan is optimal for first-time buyers with lower credit, the benefits don’t stop with this type of consumer. In fact, FHA loans are offered to homebuyers of any experience level. Whether you’re a first-timer with average credit and lower savings for a down payment or a non-first-timer seeking a new mortgage with reduced interest and PMI rates and a more laid-back underwriting process, the FHA mortgage could be a great fit.

In addition to appealing to both first-time and non-first-time homebuyers looking for lower down payments and minimal base interest rates, the FHA loan boasts a shorter timeframe following major credit problems, such as foreclosure or bankruptcy. Unlike that of a conventional loan, an FHA lender also has a higher tolerance for the debt-to-income ration, which typically caps at 45 percent—making qualification a much simpler process for everyone!

Overall, there are many advantages of choosing an FHA loan. If you’re still not sure if this is the right loan for you, contact one of our mortgage specialists today for more information.