Still Working When Others Might Not
The FHA Loan program continues to evolve, and total mortgage insurance costs have risen. While the increase makes these loans less advantageous than in the past, they are still a good option if your needs and situation preclude you from qualifying for a conventional loan.
Here are a few beneficial features:
Low Down Payment:
As little as 3.5% down will work in most instances, and 5% covers most others.
Lower Total Cash to Close:
Sellers can help pay closing costs, and borrowers can receive gift money towards their down payments.
Streamline and Cash-Out Refinances:
Subsequent refinancing can be far easier and more lenient than conventional loans.
Purchase and Rehab Financing:
The FHA 203K loan can be an excellent option for the purchase of homes in need of a quick spruce up or even major remodeling when you don’t have sufficient funds to do it on your own.
OF course, we’ll always fully assess your situation, educate you on available options and help guide you to financing that suits your needs.
Who Can Benefit From a FHA Loan?
1. First-time home buyers.
The typical first-time FHA home loan applicant is young and in the early phases of their careers, and they may still have student loans and other debt. An FHA home mortgage often costs less and is more lenient to indiscretions with credit and payments. FHA home loans don’t require a big down payment at the closing time, which can be appealing. The FHA mortgage requires a low 3.5% down payment, and that money can come from a variety of sources including HUD down payment assistance grants. Closing costs can be finically hard for people to bring to the table. Typical closing costs for FHA home loans are around 2% or 3% of the total mortgage. FHA mortgage terms may allow you to build in closing costs into your mortgage.
2. Borrowers with lower or no credit scores who can’t qualify for conventional loans.
FHA loan guidelines do not require a minimum credit score. Borrowers can be approved with little or no credit history, as long as there is no negative credit history on their report. For those that have credit, you need only one year of clean credit history.
3. Borrowers who can’t put down a 5% minimum downpayment.
FHA loans require the lowest down payments. Traditional loans require a minimum of between 5%- 10% down while FHA requires as little as 3% down. Low down payments allow people to buy homes and start building equity faster.
4. Clients with higher debt to income ratios and can’t qualify with conventional.
You can qualify with a higher total monthly debt for an FHA loan than you can for a conventional loan. Conventional loans allow for a new house payment of 28% of your monthly gross, or pre-tax income while FHA loans allow 29%. Your total monthly debt, including car payments, credit card payments, and installment loans must stay under 36% of your monthly income for a conventional loan, while FHA loan guidelines allow up to 41%, allowing more people to qualify.