September 13th, 2018
Buying the home of your dreams is one of the most exciting and rewarding things that you can do. It's also likely to be the biggest investment of your life. It can also be incredibly confusing for some home buyers who are trying to find the right loan. Shopping for your home is hard enough. Shopping for a mortgage loan can be more complex and far less fun.
FHA Loan Basics
For many, shopping for their dream home the FHA loan is the best option available. It offers a great path to home ownership and is more attainable than ever before. Learning a few facts about it is important. FHA loans are backed by the Federal Housing Administration. This guarantee from the government allows lenders to extend loans with less stringent qualifications and with better terms. In turn, the FHA borrowers will pay for mortgage insurance that protects the lender from a loss.
Top Things To Know
Here's a look at qualification requirements and other info worth knowing.
The Minimum Down Payment Is Lower
Unlike traditional loans that require as much as 20% down, FHA loans require only that you have 3.5% of the home's total purchase price as a down payment.
Your Credit Doesn't Have To Be Perfect
In fact, your credit score can be as low as 580 in order to secure the 3.5% down payment option. You can actually secure an FHA loan with a score as low as 500, but your down payment must be 10% if this is the case.
Your Lender Must Be Approved
The FHA doesn't actually provide the loans. They only secure them. As such, you'll have to get your FHA loan directly through a lender that offers FHA loans and that has been approved by the FHA.
Closing Costs Could Be Included
FHA loans do allow you to include closing costs in the loan total. However, in these instances, you may end up paying a higher interest rate.
Home Repairs Can Be Included As Well
The FHA has a special program that allows you to take out a 203K loan. This includes money that can be used to repair and remodel a home that is being purchased.
Mortgage Insurance Is Required
If you pay less than 20% down on your home, you'll have to pay mortgage insurance including an Upfront Premium paid when you get the loan and an annual premium that is paid over the course of the loan.
Loan Limits Change
Every year the FHA adjusts the maximum and minimum loan amounts. Currently, FHA loans can be between $294,515 and $679,650.
Getting Your Loan
Getting the perfect loan isn't always easy, but local experts exist to help.