Although Federal Housing Association (FHA) loans are attractive to first-time homebuyers and moderate-income earners, it is important to understand how FHA mortgage rates work in NC before applying for and accepting an FHA home loan. Perhaps the best way to wrap your mind around FHA mortgage rates in your neck of the woods is by comparing an FHA loan with a conventional 30-year fixed loan.
With an FHA loan, you can expect to pay close to the same amount that you would with a 30-year fixed loan, possibly slightly more. How so? This may come as a surprise because FHA loans are known for being highly affordable.
Why FHA Loans Might Cost You More than a Traditional Loan
To begin with, FHA loans have a 1% premium that is added to the loan amount up front. While interest rates are usually significantly lower with FHA loans, FHA loans require mortgage insurance that’s usually more costly than with traditional loans. In the end, your monthly payment might be slightly higher with an FHA loan than it would be with a 30-year fixed loan. In most cases, the difference might be hardly noticeable.
Now that you understand a bit about FHA mortgage rates in NC, you might be asking yourself, “What’s so special about FHA loans if I’m going to end up paying the same amount or slightly more than I would with a conventional loan?”
FHA Loans Make Homeownership Possible for More People
A lot of people who would never qualify for conventional loans due to poor credit scores are often eligible for FHA loans. Because FHA mortgages are backed by the FHA, lenders typically feel more secure in providing people with FHA loans when conventional loans are not an option.
Lower Down Payments with FHA Loans
The other noticeable benefit of an FHA loan over a conventional loan is that FHA borrowers are often required to pay only 3.5 – 5% down, whereas conventional loans require a 20% down payment. Of course, FHA interest rates are lower than with conventional loans, but the other expenses overshadow this fact.
FHA Can Finance Mobile Homes
Another advantage of FHA loans over conventional loans is that FHA can be used to finance factory-built or mobile homes.
If you are someone whose credit score is less than ideal, or you don’t have a lot of money up front for a down payment, or you want to purchase a factory-built or mobile and or wish to live in a mobile home park, FHA can be a great option for you.
Consider the Whole Story
As you can see, when considering the pros and cons of an FHA loan, you must weigh out all of the factors as opposed to only thinking about FHA mortgage rates in NC. FHA loans aren’t for everyone. There are both advantages and drawbacks with them. The best to do if you have questions regarding FHA loans in NC is to contact AmeriSouth and speak with a trusted broker.