FHA loans are mortgage programs insured by the Federal Housing Administration (FHA). The FHA is part of the United States Department of Housing and Urban Development (HUD). This was established to make homes affordable and mortgages accessible for people with low credit or low down payment. FHA loans are an attractive option because they are insured by the government and reduce risk for lenders. FHA loans contains many programs for different stages such as first-time buyers, reverse mortgage for seniors, and FHA 203k for renovations.
FHA Loans Qualifications
FHA loans are popular for their lenient credit approval qualifications compared to conventional loans. FHA loans have low down payments, low closing costs, low interest rates, and lower minimum credit score requirements. FHA loans can be made with just 3% down payment, a minimum credit score of 580, and the seller or lender may absorb the closing costs. However, if your credit score is below 580, you may still qualify with an increased down payment of 10%.
There are additional conditions set by the FHA. All FHA loans must be appraised only by FHA-approved appraisers and the home must meet the minimum appraisal standards. If the property does not meet the appraisal standards, the property must be repaired or the cost for repairs must be paid at the time of closing. FHA loans also come with a maximum limit that the FHA will insure.
Furthermore, all FHA loans require two types of mortgage insurances, upfront and monthly. The upfront mortgage insurance premium is a fixed 1.75% of the mortgage. Upfront insurance may be paid at closing or may be financed into the mortgage. The annual mortgage insurance is based on the terms of the loan. This figure is divided by 12 months and is factored into the monthly mortgage payment. Mortgage premiums can be canceled under certain LTV ratios. However, if the LTV was over 90% at the time of the mortgage, the insurance premium will remain for the life of the loan.
FHA Loans Program
The FHA 203k is a renovation loan program that provides funds for both the purchase and renovation of a home. There are two types of FHA 203k loans. The first is a normal 203k, which is given for properties that need structural repairs such as a new roof or a room addition. The second is the streamlined 203k, which is for non-structural repairs such as painting and new appliances. The minimum loan amount is $5,000.
Apple for FHA Loans
If you do not qualify for conventional loans, you may be eligible for FHA loans. To get approved for FHA loans, call us for a no obligation consultation at 855-990-7283.