There are a lot of reasons why Michigan FHA home loans are so popular. This kind of loan may make it a lot easier than you thought possible to get into the home you want. But that doesn’t mean an FHA loan is the best option for you specifically. You might be better off looking at something else. Gem Home Loans is here for you, with a staff of experts who will take the time to clearly explain all of your options, and then recommend the one we feel will be the best decision for you and your family.

The Basics of FHA Loans

Michigan FHA Home LoansThe “FHA” in FHA home loans stands for the Federal Housing Administration. This means the U.S. government backs this type of loan program. There are several regulations and requirements associated with an FHA loan, as you would probably expect. Not only does the FHA set rules, so does HUD (the Department of Housing and Urban Development).

There are a lot of different FHA loans, as you’ll see below. Many of them are perfect for people who are buying a home for the first time, or don’t have enough money for a large down payment.

Let’s take a quick look at some of the FHA loans that are available.

  • Home improvement loan – The FHA 203 (k) loan is designed for people to not only buy a home, but to make any needed renovations as well.
  • 245 (a) loan – This is a type of loan you might want to think about if you believe your yearly income will eventually go up. You’ll make lower payments at the start of the loan, and then the payments will gradually increase.
  • Home equity loan – This is also known as a “reverse mortgage” loan, the kind you’ve very likely seen advertised on TV for years. The formal name is a Home Equity Conversion Mortgage, or HECM. If you’re 62 or older, you can convert your home’s equity into cash or a line of credit. If you want, you can take some of an HECM as credit, and the rest as cash. You retain the title to your home.
  • Energy efficiency loan – This is fairly close to the 203 (k) loan described above. The main difference is that it’s designed to help people make improvements to their home that save energy. You might, for instance, consider an energy efficiency loan to install a solar power system.

The Pros and Cons of an FHA Loan

For decades, people across the country have found that getting an FHA loan was one of the best decisions they could ever make. Others, however, find that another type of loan program is better.

A huge advantage of an FHA loan is that you don’t need outstanding credit. As long as you have a score of 580 or higher, you will probably be able to get a loan and only have to make a 3.5 percent down payment. Conventional loans will typically require a down payment of 10 percent or more.

If your credit score is lower than 580, though, you’ll probably have to put down 10 percent.

Also, the home you’re trying to buy can’t be a “fixer upper.” It has to meet certain standards for quality. There is a chance you could try to get a 203(k) loan as described above.

The professionals with Gem Home Loans would love to tell you more about Michigan FHA home loans. Call (248) 780-1030 or contact us online for more information.