What is an FHA Loan?
FHA loans are mortgage loans insured through the Federal Housing Administration (FHA). These differ from a traditional mortgage loan from a bank because if the home buyer defaults on the loan, the lending bank has recourse from the federal government to recover the money. These mortgages make homeownership much more affordable and have easier credit requirements that are perfect for first-time homebuyers, families with lower credit scores, or with low to moderate incomes.
Traditional mortgage lenders approach home loans with an eye to how they’ll protect their investment. These loans don’t have the security of the government to repay the loan if the lender doesn’t, and therefore the requirements for being approved are higher. By contrast, FHA home loans reduce the barrier to entry for homebuyers and refinancers by featuring low down payments, flexible credit requirements, and more purchase power.
What are the Qualifications for an FHA Loan?
There are a few things that FHA loans require. First, the home you wish to purchase must be appraised by an FHA-approved appraiser. Second, these loans are only for houses that are intended to be the buyer’s primary residence – not for income properties or rental units. Buyers must take occupancy of the home within 60 days of closing. The property must be inspected and must meet minimum property standards as per the FHA.
Other requirements include a minimum credit score to qualify, plus a down payment of 3 to 10% of the value of the home, and income requirements, and mortgage insurance. In fact, mortgage insurance is one of the main differences between an FHA loan and a regular loan. The credit score, income requirements, and down payment have a lower threshold for approval than a traditional loan.
FHA loans are often the only option for people with spotty credit, or who may not have the means to place a 20% down payment for a house.
Can I refinance my house with an FHA loan?
Yes! If you have limited funds, an FHA loan can help refinance up to 80% of the home’s value.
I don't want a house. Do I have other FHA home loan options?
Yes! FHA loans are also available for qualifying condominiums, duplexes, and townhomes
Do I qualify for an FHA loan?
To qualify for the loan, you must be able to show documented proof of your income, with two-year work history, have a minimum credit score of 500, have a minimum down payment of 3.5% of the home’s value, and have no recent bankruptcies or foreclosures.
Are FHA loans just for low-income borrowers?
No! Anyone who meets the minimum qualifications for an FHA loan can apply for one. There are no income caps.
How much money will I be approved for?
The loan amount is measured by your debt-to-income ratio. The more you earn and the less you owe, the more you’ll qualify for.
Can a first-time homebuyer get an FHA loan?
Yes! Many FHA borrowers are first-time home buyers, as well.
I have an account in collections. Can I still apply fr an FHA loan?
You can still apply if you have an account in collections, but your interest rates may be higher, and you may not qualify for as much money as you would otherwise.
How long do FHA loans take to close?
The typical period is about 30 to 45 days, but if your financial situation is complicated, it may take longer.
Can I apply online for an FHA loan?
Yes! In fact, many borrowers prefer this option. Y9ou may still need to mail, or scan and email, documents that the lender needs for approval.
Can self-employed individuals apply for an FHA loan?
Yes! If you’re self-employed, you’ll need to have your current tax returns and the books for your business.
To learn more about FHA Loans, reach out to us today.
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FAIRWAY MORTGAGE - THE POTEMPA TEAM
5450 E High St #275
Phoenix, AZ 85054
AZ License #BK-0904162
4750 S Biltmore Lane
Madison, WI 53718
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