FHA LOANS: How Do You Go About It? Are The FHA Loans Convenient For You?
Thinking of purchasing a home? Perhaps an FHA mortgage can help you achieve that dream. Here we discuss everything you need to know about FHA mortgages.
In case of any doubts or questions kindly contact our mortgage experts here at Mortgage Right will clear the air for you.
What Are FHA Loans?
These are mortgage loans that are offered by private lenders but insured by the government through the Federal Housing Administration (FHA). That explains why they are known as FHA loans or FHA mortgages. The insurance is meant to cover lenders from any loss in case the borrower defaults payment.
FHA loans are especially important for people with low to middle incomes, low savings and less-than-perfect credit scores. It is also an ideal option for first time home buyers who haven’t had enough time to save for down payment, as well as struggling families.
It is worth noting that as a borrower you will also contribute to the insurance by paying insurance premiums. Even so, the FHA loan remains extremely affordable and has less strict requirements compared to traditional financing option.
How Do You Qualify To Access The FHA Loans?
Compared to other types of mortgages, FHA loans are arguably the most accessible. That is why if you are a first time home buyer you have a higher chance of qualifying for FHA loans more so than any other, because of the relaxed requirements.
The down payment and credit score are essential elements of the FHA loans that you are recommended to take into consideration.
• Down payment for an FHA loan
You can get an FHA loan with as low as 3.5% down. That’s a huge difference compared to conventional loans which require as much as 10-20% down payment. This option makes it easy for you to acquire your dream home without straining your budget.
The beauty of this option is that it also takes into account low-income earners helping them live their American dream.
• A credit score for an FHA loan
When you apply for an FHA loan, the credit score requirement is a lot more lenient compared to conventional loans. Lenders will typically ask for a score of 580 or above, but it is entirely possible to get financing for your dream home even with as little as 500. If you fall in the 500 – 579 bracket, you may qualify for a 10% down payment. The downside is that your interest rate may be higher.
• Debt-to-income ratio: Most lenders in any setting will consider your debt-to-income ratio. The lower the value, the better your chances of qualifying for an FHA loan. Most lenders prefer a ratio that doesn’t exceed 43%, but even with 50%, you can still get an FHA loan.
This value is significant because the lender wants to know that you can use a reasonable portion of your income to offset your debts.
• Employment: you must have a steady history of employment or at least spent the last two years with the same employer. This will show the lender that you have a stable flow of income and can meet your mortgage obligations.
• Appraisal: the property must be appraised by an FHA approved home appraiser.
• Insurance: upon receiving the FHA loan, you must take out mortgage insurance.
• Citizenship: you must be a lawful US resident with a valid social security number and legally of age.
What Are The Benefits Of The FHA Loans?
The FHA home loan makes for a good financing option for many reasons. Here are the top benefits:
This feature is the reason why most first home buyers consider the FHA loans. In a typical real estate transaction dealing with conventional mortgage option, a down payment of 10% to 20% is considered. However, with the FHA loans, you get to put down as low as 3.5%, which is a pretty good deal for first-time homebuyers or struggling families.
This low down payment requirement makes it easy for you to put together the required funds. Get to own your dream home with as low as 3.5% down payment.
The acceptance rate for FHA loans is optimistic. In most cases when applying for a loan, the scrutiny and requirements can make it difficult for you to access financing. However, it is different with FHA loans; they are easy to attain. We highly recommend this form of funding especially if you have struggled in the past with home loans. The requirements are less strict compared to the conventional home loans.
Your requirements regarding credit scores are more lenient compared to other home loans. Most of the loans available to users require a high income and credit score of up to even 700, which in most cases is considered as fair. Without a fair or good score, you are likely to end up paying higher interest rates. On the other hand with a range of 500 to 579 you get to qualify for a 10%, and 580 upwards for 3.5% down payment for the FHA loans.
Getting Approved for an FHA Loan
You should only apply for an FHA loan from an approved lender. The Federal Housing Authority has a list of lenders who have the mandate to offer this mortgage to homebuyers.
Here at Mortgage Right, we help American families get the best deals on FHA home loans. If you are pondering on the idea of homeownership, our mortgage experts can help you secure an affordable FHA home loan from an approved lender.
Be sure to contact us for more details. We can also help you increase your chances of qualifying for an FHA loan.