An FHA loan (Federal Housing Administration) is an insurance option offered by the government to back up a citizen’s mortgage application. The government essentially co-signs with you on the mortgage to ensure the debt is paid.
Why an FHA loan?
Some families simply can’t afford the down payment of a home. With the exclusion of VA home loans, most loan options ask for a significant down payment which reaches beyond the family budget.
Many that have been marred with bad credit find it difficult to put the past behind them, even after a couple of years of hard work to turn their habits around.
If they can find someone who will take them, they receive fixed loan rates that make payments impossible.
Benefits of an FHA Loan
An FHA loan appeals to each of these needs. FHA loans offer:
- Low down payments (less than 5%),
- More relaxed credit guidelines, and
- Low fixed rates and FHA ARM rates.
- (bonus) The option to refinance an FHA loan down the road should the need arise.
Although this loan has been traditionally the “first-time homebuyers” choice, more and more experienced buyers are viewing it as their only choice. The increased financial flexibility of the loan combined with the lower down payments and lower credit guidelines appeal to many second-, third-, and fourth-time home buyers as well.
What is an FHA Loan?
Although this loan has been traditionally the “first-time homebuyers” choice, more and more experienced buyers are viewing it as their only choice. The increased financial flexibility of the loan combined with the lower down payments and lower credit guidelines appeal to many second-, third-, and fourth-time home buyers as well.
How Can You Qualify?
You should strive to meet the following minimum requirements before you fill out an FHA loan application:
- You need to show that you have two years of steady employment (preference on having the same employer throughout that time).
- The last two years of your income should show little change.
- Your new mortgage payment should amount to about 30% of your gross income.
- Your credit should be close to squeaky clean. You should have no more than two thirty-day late payments over the past two years. Your minimum credit score should sit at 580 or higher.
- If you have any foreclosures, they must be at least three years old.
Remember that 2 years is the magic number for most of these qualifications.
How Do You Apply?
- Ensure you meet the above mentioned qualifications. It can be quite discouraging to receive a rejection for something you didn’t qualify for in the first place.
- Contact us lenders at 1.888.407.0010 to apply.
An FHA loan is one of the best ways to get into a home when past credit or lower income keeps you from qualifying for a conventional loan. Lenders will more readily accept a lower income borrower if they have the backing of the FHA to provide the benefits listed above.