FHA Home Loans
Looking for the most accessible type of mortgage loan? Then you may want to consider applying for an FHA Loan. The qualification criteria are more flexible than other loan options and are the perfect option for when you’re looking to either finance or refinance your home.
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FHA Home Loan Benefits
- You can apply for a mortgage with a lower credit score. Even if you’ve made some late payments or have not had the time to develop a good credit history, you can get a loan approved with a FICO score as low as 580.
- The down payments required for an FHA loan aren’t as high as conventional loans. Even if you have a credit score of 580, you only have to pay 3.5% of the total cost of the property you are looking to buy.
- You don’t have to rent a home for too long, and you can get into the property market much sooner. Instead of spending money on rent that you’ll never get back, you can build equity on a home that you now own.
How do FHA Loans Work?
An FHA Loan is a mortgage which is insured by the Federal Housing Administration (FHA). The insurance protects the mortgage lender from individuals who default on payments and if the home goes into foreclosure. With this protection, lenders can offer FHA Loans to people with less than perfect credit, who don’t have much for a down payment, and to those who need a little more flexibility with debt-to-income ratios.
Those who apply for one of these loans need to pay the FHA mortgage insurance. There are two types of mortgage premiums that are paid – upfront and annual. The upfront mortgage insurance premium is 1.75% of the loan amount and added to the mortgage balance. The annual premium is between 0.45% percent to 1.05% but paid monthly as a part of your mortgage payment.
Similar to conventional home loans, an FHA loan is available with 15-year and 30-year fixed interest rate terms.
Is an FHA Loan Right for Me?
An FHA Loan is popular among first-time homebuyers due to the more lenient qualifications, but they are available for anyone who fits the criteria. FHA Loans are great options for those who have little funds for a down payment, or those who don’t want to have a large down payment despite having the money to do so.
It is also a great loan program for individuals who have made some mistakes on credit – and waiting to get qualified for a Conventional Loan will take too long for their housing needs. For example, a couple who is having their first child needs more bedrooms to accommodate the new addition to the family. They need a new home within the next few months and qualifying for a Conventional home loan would be a year or more later.
One of the best aspects of an FHA Loan is the payment is very comparable to that of a Conventional Loan when only putting the minimum down payment on either of them. So, there is no need for concern of “missing out” that you don’t qualify for a Conventional Loan now.
What Is the Criteria to Qualify?
As mentioned earlier, FHA Loans have more lenient criteria compared to other mortgages. However, there are still some lending guidelines that need to be met in order to become eligible for FHA loans.
- You must provide a 3.5% down payment, which can be from your own funds or a gift from someone. For example, if your brand new home costs $250,000, then the lowest amount you’ll need to have ready is $7,500 to get approved for the loan.
- You’ll also need a FICO score of at least 580. However, if you have made over 10% of your down payment, then the required score could be lower.
- Similarly, your debt-to-income (DTI) ratio cannot exceed 47% from income sources that are verifiable. The best way to figure out your individual DTI ratio is by adding your monthly debt payments together and then dividing that figure by your monthly income before taxes.
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Why Trust House Mortgage
As one of the leading FHA home loan experts, House Mortgage has decades of experience helping people with customized FHA home loans. We are one of the top first-time home buyer experts in Connecticut, and we offer the most comprehensive selection of loan options for you to choose from - while guiding you throughout the homebuying process.
Become a first home buyer
To get advice on whether an FHA Loan is the best option for you, speak with one of our mortgage company Connecticut loan officers. We will determine which loan programs you qualify for, and make a personalized recommendation based on your unique needs.