Only the wealthy could afford to own a home during most of America’s history. The “American dream” was always spoken to. It has shifted from a daydream or a dream to an expectation in recent years. Many people consider home ownership to be an unavoidable part of life in the United States. What was the catalyst for this change? It was mostly due to the Federal Housing Administration’s provision of first-time home buyer loans (FHA). Checkout Redding First time Home Buyer Loans for more info. Prior to FHA loans, all mortgage lending rules were stringent. Many lenders recently relaxed their underwriting standards for a brief period of time. Today’s headlines discuss waves of defaults and foreclosures as a result of this. As a result, lending standards have quickly tightened again, returning to their previous levels.
Lending standards refer to a number of factors that are considered when evaluating a borrower. The first is a minimum credit score requirement. Unfortunately, many first-time buyers are too young to have built up a strong credit history. This effectively kept this group of potential homebuyers out of the market.
FHA loans attempted to address this by establishing a secondary market for loans that lacked the necessary credit history. Many young families who would otherwise have had to wait years to build a respectable credit history now have the opportunity to acquire a home. A 20% down payment was also required in the past for mortgages.
This corresponds to $25,000 even for a modest $125,000 home. Many first-time buyers lacked the necessary funds. Many first-time buyers will be put off even more by the requirement of a complete 20% down payment. This issue is also addressed through FHA loans. The applicant does not have to pay the entire 20% down payment at closing with an FHA-backed loan.
Megastar Financial Redding
920 Hilltop Dr Suite B, Redding, CA 96003
Phone no: (530) 999-9000