What is an FHA Loan?
Through the Federal Housing Administration, the U.S. Department of Housing and Urban Development launched FHA loans to make homeownership more affordable for the typical, working-class individual.
Although HUD does not offer these loans directly, it works with FHA-approved lenders to guarantee mortgages under the program. This resulted in more affordable and easier-to-qualify home loans within the financial means of families and individuals with low and moderate incomes.
Why do homebuyers like FHA loans?
The FHA mortgage is one of the best home loans available today because it has lower credit score requirements. Often, loan applications are turned down because of FICO scores. Most private lenders want your credit score to be at least 620, which is too high for many families.
However, for an FHA loan application, a credit score of 580 should be sufficient to qualify for an FHA mortgage with a 3.5% down payment. Individuals with FICO scores lower than 580 may apply if they have a 10% down payment.
FHA loans don’t have a minimum income requirement. However, there is a debt-to-income ratio that must be satisfied. Also, borrowers must have a two-year verifiable work and residence history.
What is the downside of an FHA loan?
The mortgage insurance premium, sometimes known as the MIP, is one of the program’s most significant drawbacks. If a borrower makes only a 3.5% down payment, the MIP remains in effect for the duration of the loan. The only way to cancel FHA’s mortgage insurance premium is to ultimately pay off the loan or refinance to a conventional-conforming loan.
Despite this disadvantage, many prospective buyers still choose an FHA house loan as their financing option. This is because only some alternative mortgage programs have standards that are far from as lax.
How do I apply for an FHA loan?
Any prospective buyer may avail of an FHA loan through an FHA-approved lender. There are plenty of FHA-approved lenders that offer FHA-insured loans in the country. Borrowers can apply in person, over the phone, or online to get started.
For more information on how to qualify for an FHA loan, visit https://capitalhomemortgage.com/fha-home-loans/ or call 1-800-854-4142 to speak with an FHA Loan Specialist.