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FHA Home Loans

FHA Loan

FHA loan is a mortgage that is aimed at borrowers with low-to-moderate income and insured by the Federal Housing Administration. Unlike many other conventional loans, FHA loans can be taken with lower credit scores and down payment.

A home loan insured by FHA is deemed perfect, by many, for first time home buyers, or those looking for low down payment. FHA loans allow credit scores of 580+ and down payment of 3.5% plus easy qualifying standards compare with conventional loans.

The loans are financed by an approved FHA lender in compliance with FHA lending standards. While FHA does not provide the loan, however, they protect the lender in case the borrower defaults. Consequently, FHA is providing federal support and assistance by helping home buyers with low or moderate income to get home. When searching for information you should locate the best FHA home loan guide for your area.

Due to rash of foreclosures and defaults that prevailed in the 1930s, the FHA program was created to protect, with insurance, the mortgage lenders and help home buyers having a low down payment and low credit scores with affordable and accessible loans without. To minimize the loss of a lender, suppose a borrower defaults on their payment, federal government protection insures loans for FHA-approved lenders.

Types of FHA Loans

Home Equity Conversion Mortgage Program (HECM) is a reverse mortgage program designed to help people aged 62 and older to exchange their home equity for cash while retaining award to the home

FHA 203k improvement loan lets you borrow money for the home purchase and upgrades which can be beneficial if you are limited on cash after making a down payment.

FHA’s Energy Efficient Mortgage program is created with the idea that energy-efficient homes will cost less to manage in terms of operating costs. It covers high-cost upgrades such as wind energy systems and new solar installation.

Section 245 (a) loan program is designed for borrowers who are expecting a raise in their income. Using this program, the graduated payment mortgage begins with a lower initial monthly payment and will increase with time.

How To QualifyHome Improvements

To qualify for FHA loan, it is mandatory you pay two different mortgage insurance premiums—Upfront Mortgage Insurance Premium (UFMIP) and Annual MIP (billed monthly). Depending on the amount of the loan, duration of the loan and original LTV—loan to value ratio, the MIP can vary from 0.45 to 1.05 of the amount of the base loan. For Upfront Mortgage Insurance Premium, the cost is commonly 0.85% of the loan amount.

For several reasons, borrowers are going for FHA loans. It is easy to get approved and also offer a lower down payment of 3.5% compared with the 20% required for most regular loans.

Also, despite the decrease in real estate value, FHA-loans limits remain unaffected. This has empowered more homes for FHA financing than how it is in the past due to maximum loan size available relative to the typical sales price.

How to Apply

If you want to apply for an FHA home loan, you have to get in touch with an approved FHA lender. For any government loan product such as FHA insured loans, the approved broker is the FHA Loan Centers.

  • History of steady employment
  • Must be a legal residence in the US and have a valid social security number
  • To apply towards the purchase price, you will have to have a minimum down payment of at least 3.5%
  • Your gross monthly income should be at least 31% greater than your mortgage payment including—PITI
  • Your total monthly debt should be less than 43% of your income monthly income. This includes credit cards, student loans, car loans and mortgages
  • You must not have any record of bankruptcy for the past two years
  • With good credit, you should be at least 3 years from a foreclosure
  • You must have at least 580 credit score

FHA is a great loan option, but it is not for everybody if your credit score is less than 500. It will not help you if you are aspiring to buy a new house and have a large down payment.

Instead, go for a conventional mortgage. It will be be better because you could save more money in the long run. Conventional loans with large down payments don't have a mortgage insurance premium.

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