If you are in the situation where down payments are proving too high or bad credit is prohibiting you from qualifying for a traditional mortgage, then an FHA-backed loan could be the option for you. As these loans are backed by the government they allow for lower down payments than normal and can be taken out by people with slightly poorer credit scores. Down payments are capped at 3.5 per cent as long as the borrower has a credit rating of 580 or higher. To qualify you will have to prove to your lender that you have been in full employment for at least two years.
The FHA also offer a second type of loan called the 203K loan, which is given to people who want to renovate or make improvements to their property . It is a specialized loan, backed by the Federal Housing Administration and works in a similar way to the normal FHA loan. It is available to both buyers and house that are seeking to refinance. It combines the traditional “home improvement” loan with a standard FHA mortgage, allowing homeowners to borrow their renovation costs.