FHA Loan
FHA Loan
Government Backed Loan
Low down payment, easy qualification guidelines and competitive interest rates FHA loans are available for people with credit scores of 580 or higher and down payments as low as 3.5%. This makes these loans more accessible than other mortgages.
Federal Housing Administration (FHA) backed mortgage loans are popular because they provide prospective and existing home owners the opportunity to receive a government guaranteed mortgage with a low down payment, easy qualification guidelines and competitive interest rates compared to conventional loans.
The most popular FHA loans are the fixed rate, adjustable rate and rehabilitation products. FHA backed loans gives the opportunity for people to buy homes that may not qualify or have the down payment a conventional loan may require. It is a great program for first time home buyers and people who may have experienced credit issues in the past.
- FHA loans can allow you to purchase a home for as little as a 3.5% down payment
- FHA has flexible credit requirements to receive an FHA loan
Some Requirements:
- Steady verifiable employment
- Bankruptcies (if applicable) should be at least 2 years removed
- Foreclosures should be at least 3 years removed
- Monthly mortgage payment shouldn’t exceed more than 30% of your gross monthly income before taxes
- 3-5% down payment for new purchases
- A minimum 3.5% down payment.
- A minimum FICO® Score of 580.
- A debt-to-income ratio (DTI) of no more than 50% and a steady employment history. Estimate your DTI by adding your monthly debt payments (such as credit card and car payments) and dividing the total by your monthly income before taxes.
- Money to cover the upfront mortgage insurance premium (UFMIP). The amount is usually equal to 1.75% of your loan amount.
- Money to cover closing costs, which could be anywhere from 2% – 6% of the purchase price.
What are the benefits of FHA loans?
EASIER TO QUALIFY
Because of their low credit and down payment requirements, FHA loans are typically much easier to qualify for than conventional loans and make the most popular type of first-time homebuyer loan used to purchase a home. Borrowers need a minimum FICO score of 580 to qualify for a 3.5 percent down payment. If your FICO score is between 500 and 579, a 10 percent down payment is required. There also are no maximum income limits, but you must meet a debt-to-income ratio limit of no greater than 43 percent and demonstrate adequate income to repay the loan principal.
LOWER DOWN PAYMENT REQUIREMENTS
An FHA loan is typically one of the easiest types of home loans to qualify for because it allows a low down payment and less-than-perfect credit. An FHA mortgage has a maximum loan-to-value ratio of 96.5 percent, meaning you only need a 3.5 percent down payment. Borrowers who are unable to save up 20 percent for a down payment or have a lower credit score should consider whether an FHA loan could serve their goals.
NO APPRAISAL REFINANCE
The FHA does not require an appraisal on a streamline refinance, which is important because it means borrowers with little or no equity may be able to refinance.
COMPETITIVE FHA MORTGAGE RATES
Unlike conventional home loans, FHA loans are government-backed, which protects lenders against defaults, making it possible for them to offer prospective borrowers more competitive interest rates on traditionally more risky loans.
STATE AND LOCAL PROGRAMS CAN LOWER FHA COSTS
There are more than 2,000 homeownership assistance programs that work in tandem with FHA loans to provide additional assistance with down payments and other costs. Most of these programs have income limits.
FHA LOANS ARE ASSUMABLE
FHA home loans are assumable, which means that if the borrower decides to sell the house, the new buyer can take on the loan in their place. Such a feature can also be very useful, for instance, if they need a co-signer in order to buy a house but later want to assume full responsibility for the loan when they get sufficient funds.
I'm interested in the FHA Mortgage loan through Mortgage Fast
Enquire NowFHA Property Requirements
- Your loan can’t exceed the loan amount limits in your area. The FHA’s limit for lower-cost areas is set at $314,827 in 2019. In high-cost areas, the limit for 2019 is $726,525. In 2020, the FHA’s numbers will increase to $331,760 and $765,600 respectively.Look up the loan limits in your area.
- The home must meet the FHA’s minimum property standards:
- Safety – the home shouldn’t affect the health and safety of the people who live there.
- Security – the property needs to be secure.
- Soundness – the home shouldn’t have defects that affect its structural integrity.
- When buying a home, you’ll need to move in within 60 days of closing.
- It must be your primary residence. Investment properties and second homes don’t qualify for FHA loans.
Frequently Ask Questions
If you have a question that deals with clients, customers or the public in general, there is bound to be a need for the FAQ page.
This loan is a great option for people whose credit scores are 580 and higher, and who have a 3.5% down payment. Read more about other benefits below.
These loans are insured by the Federal Housing Administration (FHA).
The FHA protects lenders against defaults on payments. This makes it easier for you to qualify, and allows lenders to offer lower interest rates.
- A minimum 3.5% down payment.
- A minimum FICO® Score of 580.
- A debt-to-income ratio (DTI) of no more than 50% and a steady employment history. Estimate your DTI by adding your monthly debt payments (such as credit card and car payments) and dividing the total by your monthly income before taxes.
- Money to cover the upfront mortgage insurance premium (UFMIP). The amount is usually equal to 1.75% of your loan amount.
- Money to cover closing costs, which could be anywhere from 2% – 6% of the purchase price.
In order to use an FHA loan to buy a house, the property must meet the Department of Housing and Urban Development’s minimum property criteria. FHA loans are available for many different types of FHA-approved properties:
1-4 unit residential homes
Townhouses and condominiums
Mobile, manufactured and/or modular homes
Need help determining if your property qualifies for an FHA loan? Our Mortgage Fast loan officers offer no-obligation mortgage consultations and quotes.
A conventional mortgage loan is originated in the private sector and is not insured by the government. This means that, unlike federally insured loans, conventional loans carry no guarantees for the lender if the borrower fails to repay the loan.
An FHA loan product is also originated in the private sector, however, it is insured by the government through the Federal Housing Administration. This insurance is designed to protect the lender, not the borrower. It means if the borrower defaults on the loan and their house isn’t worth enough to fully repay the debt through a foreclosure sale, the FHA will compensate the lender for the loss.
That security of the FHA comes at the cost of the borrower. With FHA loans, the buyer must pay a percentage of upfront mortgage insurance premium at closing, regardless of the down payment. Then, the buyer must make monthly mortgage insurance payments for the life of the FHA loan if the down payment is less than 10 percent.
Another important difference to note (as compared to conventional loans) is that FHA loans generally have smaller down-payment requirements and more flexible underwriting standards. As a result, an FHA loan may help individuals with less-than-perfect credit and less cash on hand qualify for a mortgage or refinance. However, it’s important to note that while the FHA may less strict qualifying standards, individual banks and lenders will always set their own FHA underwriting guidelines on top of those, known as lender overlays.
Finally, they can allow the home to go into foreclosure. The decision your heirs make will usually depend on how much equity is in the home. You shouldn’t take a reverse mortgage if leaving your home to your heirs is a high priority for you.