Federal Housing Administration (FHA) mortgages seem to be popular among millennial home buyers, as 35% of those born between 1980 and 1999 chose FHA mortgages to fund their home purchases, according to an analysis.
The analysis based its findings on loans that were closed in January 2017. The millennials’ share of FHA loans and other financing packages stood beyond the 21% total market share of the government lending institution.
FHA’s popularity can be attributed to its several benefits, including less financial requirements.
An increasing number of millennials account for first-time home buyers. Many of them decide to apply for an FHA loan program, as they look into the bigger picture of the total package beyond the usually small upfront fees.
As it turns out, the popularity of FHA loans is partly because of their flexible down payment terms, reaching as low as 3.5%. While that’s comparatively higher than Fannie Mae and Freddie Mac’s minimum of 3%, the latter two needs applicants to meet eligibility requirements.
FHA-backed loans may have less stringent requirements, but the chances of approval are not always 100%. For instance, you’ll need to have a FICO score of at least 580. That’s significantly lower than the average of 748 for closed Fannie Mae or Freddie Mac loans in January, which may be one reason why more people prefer FHA mortgages.
Aside from meeting debt-to-income ratio standards and providing certain documents, you should also have a steady source of income. It may be obvious, yet many still tend to neglect this basic rule.
An FHA loan may be the best option for you, but there are other factors that will ultimately determine if you are financially capable of paying it off. It’s best to consult with mortgage lending advisers for you to know the best option for your home purchase.