FHA Loans Benefits For Real Estate Investors

People is probably assuming that FHA loans are only for home owners, but real estate investors can also take benefit of this government home buying program.

Definite requirements need to be achieved.

If real estate investors live in the residence as their primary home for one year, they may use FHA loans. An additional primary advantage of an FHA loan: You could use the profit you will create from multi-unit investment properties to help qualify for an FHA loan.

Also, it is possible for real estate investors to buy FHA homes that are in foreclosure.

What Are FHA Loans?

The U.S. government is in the home buying business. FHA loans are still one of the most popular ways to buy a home for buyers with a small down payment or blemished credit.

An FHA loan is mortgage backed by the Federal Housing Administration. The government agency was created as part of the National Housing Act of 1934 following the Great Depression.

Today, it has provided financing for millions of Americans to buy homes. Unlike some government programs, FHA loans are available for everyone.

The amount of FHA loans will vary by state.

FHA loans became popular because they are one of the most affordable ways for homeowners and even real estate investors to purchase homes. You can possibly own a home for just 3.5 percent down. Your down payment doesn’t have to come from your own earnings, but can be a gift, grant or sweat equity.

With FHA loans, sellers are allowed to pay up to 6 percent of your closing costs, which means more money in your pocket. Plus, there are generally fewer credit requirements than a traditional mortgage loan.

Requirements For An FHA Loan

-An FHA loan requires two years of documented work history. By just saying you’ve worked is not enough, you’ve got to prove it with tax returns. I could be very helpful if you've spent two years in the same profession.

-FHA requires a minimum 620 FICO credit score. You can possibly purchase a home with an FHA mortgage if you’ve had a Chapter 13 bankruptcy, once you have a 12-month track record of on-time payments. The bankruptcy must have been discharged for two years.

-Another requirement is a 3.5 percent down payment. This may change to 5 percent in 2010, but it is still lower than traditional mortgage financing that requires 20 percent down.

Home buyers and real estate investors can benefit from FHA loans.