Finance 101: Everything You Need to Know About FHA Loans

Before a person can buy a home, they need to have the money. If they can’t pay for it from their own pocket, they can get a loan. One example of a perfect loan for first-time homebuyers is an FHA loan.

This article will discuss what’s there to know about FHA loans. Read on below to get started.

More about FHA loans

FHA loans are insured loans, meaning the government will step in if you cannot pay the loan. It also means that you won’t need to spend a lot of money upfront. It doesn’t matter if you have bad credit; you can still get one of these loans if you have a little money to put down.

These loans are great for people who have the assets but not the cash. They’re also great for bad credit people, as it doesn’t matter to the lender whether you have a bad credit history. If you have a job and have all the money for a down payment in place, you can get one of these loans.

What If I Have Bad Credit?

One of the best parts of getting a home loan is that you won’t have to have a pristine credit history if you have bad credit. If you have bad credit and can get a loan, getting a loan will make your credit score go up.

When you’re looking for a loan, you don’t have to have the highest credit score around. But, if you have bad credit, it’s possible to get a loan, and it’s a good idea to make sure you don’t let your bad credit stop you from getting a loan.

FHA loans are great for people with bad credit, and in most cases, you can get an FHA loan with a credit score as low as 580. It’s important to talk to a lender and see exactly what your options are, but you shouldn’t let a low credit score stop you from getting an FHA loan.

The Types of FHA Loans

There are different types of FHA loans. These include:

Home Equity Conversion Mortgage (HECM)

HECM is a type of loan that allows you to convert the equity in your home into an annuity cash flow over time. This is an excellent option for people who want to keep their equity in the house but still need cash.

FHA 203(k) Improvement Loan

This type of loan is perfect for people who want to improve their homes but don’t want to spend money upfront. It’s also great for people who want to buy a fixer-upper and fix it up. With an FHA 203(k) loan, you can get a loan to fix the house up, and then you won’t have to pay back any of the loans on the house until it’s sold.

FHA Energy Efficient Mortgage

This type of loan is perfect for people who want to improve their homes and make them more energy-efficient. You don’t have to pay anything back on this loan until the home is sold.

Section 245(a) Loan

This is a unique type of loan specifically created to help low-income families get into a home. This loan gives people the chance to get into a home, but the government will pay the monthly mortgage payment.

However, keep in mind that if you make a lot of money or get an inheritance, you might find that you aren’t eligible for this loan. This is because one of the requirements for the loan is that you must have a deficit in your monthly income.

The Benefits of FHA Loans

When you compare FHA loans to conventional loans, you’ll find that FHA loans have some significant benefits. These include:

No Down Payment Required

You won’t have to have a down payment with an FHA loan. This is because, with an FHA loan, you can have a mortgage that’s up to 96.5% of the home’s purchase price. You can pay the rest of the difference in cash.

You Can Have a Low Credit Score

With an FHA loan, you don’t have to have the best credit score in the world. If you have bad credit, you can still get a loan.

Additionally, many people find that their credit score goes up when they get an FHA loan. They have a loan in place, which means they have a very low mortgage, and the lender will go ahead and report the good payment history to credit bureaus.

No Need for Private Mortgage Insurance

You won’t have to pay for private mortgage insurance (PMI) with an FHA loan. This is a great benefit, especially for people just starting out who might not have very much money in the bank.


All in all, FHA loans are an excellent choice for anyone who wants to buy a home. These government-insured loans are a great way to get your dream home, even if you have bad credit or don’t have a lot of money.

Hawkins Home Loans have comprehensive programs for FHA loans in Sacramento. All of our rates are reasonably priced, and we’ll also give you all the time you need for repayments. Contact us today to learn more!