An FHA loan is a useful mortgage product for those that may not be able to put down a substantial down payment on the purchase of a home. This FHA insured product, gives lenders peace of mind for applicants who may not benefit from the terms of a conventional home loan. Individuals may be able to own their first home using the FHA loan product and put down as little as 3.5 percent.
There are many different types of mortgage products on the market. An FHA loan may not be the right product for everyone. Learn more about who should apply for an FHA loan and get additional details about this mortgage loan product today.
Initial Eligibility Requirements
Those of legal age and who are lawful U.S. residents may sign for this mortgage product. A loan officer can provide additional details on the minimum age requirements in a state. Those who are applying for residency may have to wait until applying for this product. In addition, it is important that the home be owner-occupied. An FHA loan may not be an appropriate choice for those looking to purchase an investment property.
Extra Fees with Mortgage Insurance
Borrowers approved for an FHA mortgage loan are often obligated to pay mortgage insurance. Upfront premiums can often be rolled into mortgage loan payments. Mortgage insurance payments do not go into paying down the balance of a loan and continue for the life of the loan unless the loan is refinanced and a borrower chooses a non-FHA backed loan. While PMI can be required in the case of conventional loans, PMI can be cancelled and will not be required for the entirety of the mortgage loan product.
Basic Requirements of an FHA Loan
This is not a product for those with high amount of debt or a low credit score. Such individuals will generally not be approved unless changes are made ti improve their score and pay down outstanding debt. The basic requirements of an FHA loan include:
- Good credit;
- Satisfying debt-to-income ratios;
- Steady job history; and
- Timely payments of previous debts.
Those who have a credit score of 580 or above may be allowed to make a smaller down payment. Other applicants with lower credit scores may be required to make a down payment of 10 percent toward the purchase price of a home. There are multiple factors that will be considered when a lender chooses to approve an applicant. Taking the time out to improve credit scores can make it more likely that a lender will be able to approve an application.
The Goal of an FHA Loan
FHA loans allow individuals who may not be able to be approved to buy a Bridgeland home due to not providing a large down payment, make their dream a reality. It makes homeownership more accessible for legal U.S. residents. Estimates and requirements may differ between lenders who are FHA-approved.
Know Your Options
Investigate the many loan products available on the market. VA loans are another product allowing borrowers to make a small down payment and other loans may require zero down. However, this may mean that borrowers are paying more over the lifetime of their loan. An FHA loan may not be the best option for those who can put 10 to 20 percent down. This loan is useful for those who have experienced a bankruptcy or foreclosure. Speak with a lender to learn more about an FHA loan today.