The FHA loan is very popular among first time buyers. The loan is easier to obtain because credit requirements are lower. Additionally, if might often come with a lower interest rate. However, the FHA loan may not be for everyone. Get the facts about FHA loans to determine if the product is best for you.
Fact #1:
The FHA loan is a government loan. It is a mortgage insured or backed by the Federal Housing Administration.
Fact #2:
Borrowers of the FHA loan are required to pay for mortgage insurance. This insurance protects the lender from loss in the event the borrower defaults.
Fact #3:
Mortgage insurance exists for the life of the loan. With a 3.5% down payment, monthly mortgage insurance is 0.85% of the loan. There is also a one-time upfront mortgage insurance payment of 1.75% of the loan.
Fact #4:
The minimum down payment for an FHA loan is 3.5% and the minimum FICO score is 580. Debt to income cannot exceed 43%.
Fact #5:
The FHA loan comes with a stricter appraisal process. If certain requirements are not met, the loan will not be approved. Additionally, a FHA appraisal follows a house.
Fact #6:
99% of condominiums are NOT eligible for a FHA loan. If a condominium does qualify for a FHA loan, a minimum down payment of 10% is needed to get the condominium approved through underwriting. For a list of FHA approved condominiums in your market area, visit the HUD database.
Fact #7:
You can borrow up to $331,200 in Harris County with a FHA loan. The amount can vary in other areas of the state or country.
Fact #8:
Non-occupant co-borrowers are permitted.
Fact #9:
A borrower does not have to be a first time buyer to be eligible for the FHA loan.
Fact #10:
The total package matters. A low credit score will need to be balanced with a larger down payment or better income.
Do you have questions about your mortgage options? Are you ready to buy a home? Ask your questions in the comments below, or reach out to me directly at 832-513-9931.