Are you a first-time homebuyer with limited cash for a down payment? Has your credit history seen better days? If you answered “yes” to either of these questions, we want you to know that you have options at the mortgage desk.
One of those options is an FHA loan. The FHA is a government organization that provides mortgage insurance to approved lenders. If the homeowner defaults on their FHA mortgage, the FHA will pay a claim to the lender. This makes it less risky for lenders to issue mortgages to people with somewhat questionable financial profiles.
Characteristics of an FHA Mortgage
FHA mortgages are an attractive way for low- to moderate-income buyers to reach their homeownership goals. Here are a few of the program’s highlights:
- Borrowers can have a credit score as low as 500 to qualify.
- A down payment of 10% is required for borrowers with credit scores that fall between 500 and 579.
- A down payment of only 3.5% is required for borrowers with credit scores of 580 or higher.
- Loan terms of 15 or 30 years are available.
- Mortgage insurance is required.
- Borrowers can use gifted funds to cover their down payments.
- Down payment assistance is available to qualified buyers.
Do All Homes Qualify for an FHA Loan?
FHA loans are available for single-family residences, townhouses and approved condos. To qualify for an FHA loan, the home must:
- Be owner-occupied.
- Be the owner’s principal residence.
- Not be a rental or investment property.
- Receive a property appraisal to ensure that it meets the FHA’s standards.
A Note About Mortgage Insurance
FHA mortgages require the borrower to purchase mortgage insurance to keep eligibility requirements as forgiving as possible. Mortgage insurance includes two parts: an upfront premium and an annual payment. The annual payment is usually incorporated into your monthly mortgage. Your upfront premium can also be rolled into your loan to keep closing costs low.
If you put at least 10% down on your FHA loan, you’ll pay mortgage insurance for 11 years. If you put less down, you’ll pay it for the life of your loan.
Contact Us Today!
Are you wondering if an FHA loan could be your key to homeownership? Contact MortgageDepot today to discuss your eligibility requirements!
Connect with one of our loan consultants for more information.