fha loans
What are FHA Loans?
FHA loans are mortgages backed by the Federal Housing Administration. These loans are great for first time home buyers who are looking for more lenient options for their lending. FHA loans offer lower down payment options and competitive interest rates for qualified buyers.
How do FHA Loans work?
FHA Loans allow the borrower to borrow up to 96.5% of the homes value. Typically qualified borrowers with a credit score of 580+ are eligible for as low as a 3.5% down payment. Borrowers with a 500-579 credit score may still qualify for an FHA Loan with 10% down, but each lender may have their own credit requirements. Although FHA Loans require a lower down payment and credit score than other loans, you will have to pay a mortgage insurance premium.
Benefits of an FHA Loan
- Credit score requirements are lower than other loan options
- Lenders can accept a lower down payment
- Borrowers with financial issues in their financial history may still qualify
- Certain closing costs can be rolled into the loan
FHA Loan Qualifications
Certain qualifications must be met to apply for an FHA Loan, such as:
- The home being considered for purchase must be appraised by an FHA-approved appraiser
- The property must be your PRIMARY residence
- You must occupy the property within 60 days of closing on the purchase
- An inspection is required and must state that the home meets all minimum property standards
- The monthly mortgage payment should not exceed more than 31% of your monthly gross income and your debt-to-income ratio can not exceed 43%, except for circumstances where the borrower has a higher credit score
- Must have verifiable, steady work history that can be proven with W2's, tax returns and/or bank statements
FHA Loan Limits
FHA loan limits vary by area but are generally capped at $1,149,825 for high cost metropolitan areas and $498,257 for lower cost areas. These rates are periodically changed to account for market prices and can be higher depending on the number of units on the property