Everything You Need To Know About FHA LoansMarch 29, 2021
Have you secured an FHA loan? Are you wondering if an FHA loan is right for you? Whether you’re looking for more tips or exploring your options, here’s everything you need to know about FHA loans.
What Are FHA Loans?
FHA loans are mortgages insured by the Federal Housing Administration. Created in 1934, the Federal Housing Administration is a government division that works to increase home construction, reduce unemployment, and operate various loan insurance programs.
The FHA is not a loan lender. Instead, it insures thousands of loans for Americans who could not otherwise afford or qualify for a home loan. Therefore, these loans are obtained through approved lenders based on the requirements set forth by the Federal Housing Administration.
FHA loans are popular amongst first-time homebuyers because they require lower down payments and are accessible to individuals with credit challenges. FHA loans require a minimum of 3.5% down for a credit score of 580 or higher. They can be used to buy or refinance single-family houses, two-to four-unit multifamily homes, condominiums, and certain manufactured homes.
Many FHAs offer lower monthly mortgage insurance payments, but some may involve closing costs not required by conventional loans.
Different Types of FHA Loans
The FHA offers several different types of loans to those who qualify. These include:
- Basic Home Mortgage Loan 203(b) with fixed or adjustable rates.
- 203(k) Rehab Mortgage, which finances purchase and renovation with one loan.
- Construction to Permanent Loan (CP), which funds the construction of a home and the land on which it will be built.
- Title I Property Improvement Loan can be used to purchase a manufactured home or repair an existing home.
- Energy-Efficient Mortgage (EEM) finances energy-efficient upgrades to new or existing homes during the home purchase or refinance process.
All FHA loans have price limits. In 2021, FHA loans range from $356,362 to $822,375 based on your county.
How to Qualify for an FHA Loan
To qualify for a mortgage loan through an FHA-approved lender, you’ll need to meet the FHA’s minimum requirements. Remember that some lenders may have additional stipulations, so shop around to compare terms and offers. The basic requirements set forth by the Federal Housing Administration include:
- A minimum credit score of 500
- As low as 3.5% down payment for applications with a credit score of 580 or higher
- 10% down payment for applicants with a credit score of 500-579
- A debt-to-income ratio of less than 50
- The property you’re trying to buy must meet FHA minimum property requirements.
- An upfront FHA mortgage insurance payment
Talk to your financial advisor about the personal and financial documents required to apply for your loan. Documents you’ll need include:
- Valid social security number
- Proof of U.S. citizenship, legal permanent residency, or eligibility to work in the U.S.
- Bank statements for at least 30 days
- Pay stubs
Talk to a Certified Palmdale Financial Advisor for Help
If you’re ready to apply for an FHA loan, we’re here to help. Contact All American Financial Services today for assistance with all your Palmdale refinance and loan questions.