WHAT IS AN FHA LOAN?
Unlike traditional home loans and mortgage structures, FHA loans, insured by the Federal Housing Administration, can be a great alternative option for prospective buyers who would otherwise find it difficult to qualify for a mortgage due to their income level, credit history, or their ability to place a down payment on their chosen property.
Borrowers are typically eligible to qualify with a credit score of 580 or higher. Loans approved to borrowers within this credit bracket require a down payment of just 3.5% of the total cost of the home whereas those with a credit score between 500 and 579 would require an initial payment of 10% of the home’s cost. The flexible underwriting standards permitted by the FHA allow a broader range of borrowers to become homeowners.
WHAT ARE THE FHA LOAN LIMITS AND CAN YOU QUALIFY?
Wondering if an FHA loan might be right for you? Pick up the phone and contact us today to schedule a consultation with a member of our highly professional and experienced team. Our goal is to help you quickly identify if you meet the loan requirements for an FHA loan and determine if this loan program will help you along the way to securing your new home. Consultations can easily be arranged by calling us at 858.401.3332
EXPANDING HOME OWNERSHIP THROUGH FHA LOANS
To date, an FHA loan is generally regarded as the easiest loan to obtain. With relatively low qualification standards meant to benefit first time homebuyers, the ability to own a home is made more accessible to a wider range of interested buyers. It is important to keep in mind that while qualifications may be more flexible, there are still additional requirements that must be met by the buyer and their desired property. In order to ensure that the property meets the FHA standards of condition, an FHA-approved appraiser will be required to conduct an appraisal of the property. While this may start to feel slightly overwhelming, your Lending Corner professionals are here to assist you.
REDUCED DOWN PAYMENT AND FLEXIBLE FUNDS SOURCING
One of the largest barriers into home ownership for interested buyers has been the looming fear of having to make a hefty down payment. While other conventional loans may require as much as a 20% down payment, an FHA loan can require as little as 3.5% down. This lower rate has been largely helpful when it comes to first-time homeowners. One unique feature on an FHA loan is that some or all of the down payment can be a gift from a family member. This differs from other loan programs that often require that the funds used for a down payment be exclusively verified.
There can be a few unexpected costs when it comes to the closing process. A few to note would be appraisal costs, a credit report, and title expenses. Sometimes these costs can be covered by the seller or lender. These costs can be used by the seller during the negotiation process or even included in the overall loan price (interest rates may apply). Feel free to discuss these costs with both your lender and seller to make sure that you have explored your options and have a good idea of how much money is involved with the closing process. Staying informed and ahead of the fees will help you plan along the way.
Depending on the amount of money you are able to place down on your property, you may be required to have Mortgage Insurance for you FHA loan. Borrowers who are able to make a larger down payment can typically reduce, or avoid these additional mortgage insurance fees since they have personally assumed a more substantial amount of the risk. For those that do need Mortgage Insurance, this is typically done through a two part process. First, you will pay an initial premium that equated to about 1.75% of the base loan amount upfront. From there, you will be required to pay an annual premium that is broken down into monthly installments. This payment amount will be determined by the total amount of the loan, as well as the years financed.
For more information about applying for and qualifying for an FHA loan, please speak to one of our experienced team members by calling 858.401.3332.
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