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Why is an FHA loan popular with first time home buyers?

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Final answer:

An FHA loan is popular with first-time home buyers due to lower down payment, flexible credit requirements, lower interest rates, and mortgage insurance.

Step-by-step explanation:

An FHA loan is popular with first-time home buyers because it offers several advantages:

  1. Lower down payment: FHA loans require a lower down payment compared to conventional loans. This makes it easier for first-time buyers who may not have a large amount of savings.
  2. Flexible credit requirements: FHA loans have more lenient credit requirements, making it easier for first-time buyers with limited credit history to qualify.
  3. Lower interest rates: FHA loans often have lower interest rates compared to conventional loans, helping first-time buyers save money over the life of the loan.
  4. Mortgage insurance: FHA loans require mortgage insurance, which protects the lender in case of default. However, it allows first-time buyers to qualify for a loan with a lower credit score or smaller down payment.

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