FHA loans are insured by the Federal Housing Administration so what makes them a great option when considering buying land? Borrowers of FHA loans pay for mortgage insurance which protects lenders in case of a loss. Often because of this, FHA loans are regularly more flexible when it comes to qualification requirements and less rigid with attractive interest rates. They also tend to have lower down payment requirements so why not buy land with an FHA loan?
With an initial down payment of generally 3.5 percent, this loan is a highly appealing choice for those looking to budget on costs and pay smaller rates over time. But please note, that FHA is an insurer and not a lender so make sure you talk with your lender about FHA loans and read up on the lenders policies. FHA loans may differ according to each lender and often in order to buy land with an FHA loan, most lenders require you to have proof that a home will be built on the land in the near future or a mobile home is put on the property.
Other reasons to buy land with an FHA loan include wanting the security of a government insured loan for the purpose of a future construction. While the housing market may be much more favorable towards new construction loans, read the fine print and know what it all entails. Government ensured loans just like any other loans, require repayment and also incur interest over time. Some of the limitations of FHA loans for the purpose of buying land include the fact that the construction has to be primarily residential and not for the purpose of business. Some pros of choosing this sort of loan include that there is generally more regard given to the full process of purchasing land (i.e. making sure it is safe, livable and acceptable) because of the government aspect of the loan.
So when you decide to take that step to purchase land for your new home, consider an FHA loan for some of its added benefits and security. Make sure you speak to your lender to understand the policies regarding the loan and do not be afraid to ask questions. Understanding what is right for you can make all the difference in securing your future.
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