A Federal Housing Administration (FHA) loan a type of mortgage that is insured by the FHA. With an FHA loan, the requirements are more lenient than those of a conventional loan. Some of the benefits of an FHA loan include lower down payment requirements, lower closing costs, and lower credit score minimums. Because of these lower loan requirements, they are a great opportunity for first-time homebuyers.
Advantages of an FHA Loan:
|Minimum down payment of 3.5% (A minimum down payment of 10% may be required for lower credit scores)Minimum credit score of 620
No pre-payment penaltiesA debt-to-income (DTI) ratio of 50% or lessLow interest ratesLow closing costs
The FHA has specific loan limits set for each state and county. These loan limits have recently increased in many states. Review the FHA loan guidelines here.
FHA Loan Programs:
FHA Home Purchase Loan
With a down payment of just 3.5% of the purchase price and a minimum credit score of 620, an FHA loan might be the best option for you. They make it easier to qualify since they eliminate many of the roadblocks that come with purchasing a home. Although FHA loans have lower requirements, your credit score, DTI ratio, and down payment amount plays a role in the amount you are qualified to borrow.
FHA Streamline Refinance
This program enables homeowners to lower their interest rates fast. It also allows homeowners to skip verification for credit, income, and employment history. It does not require that a borrower’s property be reappraised. The FHA bypasses this by using the original selling price of the home.