Thinking about getting an FHA loan and wondering if you qualify? Here are some important facts to know about FHA loan requirements before you call a local lender.
First, what is an FHA loan? It’s a mortgage insured by the Federal Housing Administration and when you take out an FHA loan you’re required to pay mortgage insurance which will protect the lender if there’s a default on the loan and you don’t pay your obligation. With that insurance, it allows the lender to offer you a great rate with less strict loan requirement and guidelines. The lender must be an FHA approved lender and not all lenders are so make sure you ask around or contact us for information on FHA approved lenders that we’ve used before.
Second, what kind of credit score do you need? There’s no minimum credit score and each borrower is considered relative to the loan and circumstances but the individual lender may require a minimum credit score even if the FHA doesn’t.
Third, how much is the down payment for an FHA loan? FHA loan requirements for the minimum down payment is 3.5% which is just a fraction of the amount required for most conventional loans. However, we do have a lender who does conventional loans with 5% down; if you’d like more info on that send us an email or give us a call.
Fourth, there is a requirement for mortgage insurance. There’s an initial insurance premium that is 2.25% of the loan and then annually the borrower is going to pay 0.55% of the loan amount which is paid in monthly installments every year.
Another great feature of FHA loans is that there may be additional funds available for repairs and closing costs. Also, there is a possibility, in the event of a hardship, that the loan can be modified, deferred, or not paid for a period of time. It’s a more flexible loan than other conventional loans but not everyone qualifies.
