The FHA loan is our favorite loan because it allows for a higher debt-to-income ratio and lower credit scores-even down to 500. If your score is 580 and above, it requires only a 3.5% down payment. If your score is 500-579, it requires a 10% down payment. Also, FHA rates are very favorable, generally at least one half a percent lower than Conventional.

Often times, the FHA Loan has been reported as a First Time Homebuyer loan. That is not the case. Anyone can get an FHA Loan. In fact, it is possible to have two FHA loans at one time*, one on your old home and one on your new home.

After reviewing the details below, please feel free to reach out to us with any questions.

What is an FHA Loan?

FHA loans are insured by the Federal Housing Administration and enable a variety of lenders, like banks,  credit unions, and private mortgage companies, to fund home purchase loans with low down payment requirements.

FHA Home Loans Requirements

Both first-time home buyers and experienced home buyers may be able to qualify for a FHA loan and take advantage of a low down payment option with easier credit qualifying than conventional loans. However, there are several requirements FHA loan applicants must meet. These include:

• The home must be appraised by an FHA-approved appraiser and meet certain guidelines.

• The property must be a primary or principal residence, not a second home or an investment.

• The borrower must occupy the property as the borrower’s primary residence within 60 days of closing the loan.

Streamline Refinance

One great advantage of an FHA loan is that you can do a Streamline Refinance when rates go down. There are requirements on how long you have had your loan, but the applicant does not need to have their home appraised to qualify, and there is no income or employment verification required. With little documentation and no appraisal, it is a quick and easy process.

Mortgage Insurance and Loan Limits

Individuals are required to pay Mortgage Insurance Premium (MIP) on their FHA loan to insure FHA lenders against losses if they default their loan(s). The MIP is paid for the life of the FHA loan or 11 years if you made a 10% down payment. Also, lenders require borrowers to pay an upfront mortgage premium, which is 1.75% of your loan.

The current loan limit, not including the up-front mortgage insurance premium is $524,225. For high-cost areas, the loan amount may be up to $1,209,750.

FHA Summary

We love FHA loans! FHA home loans are:

• Government-insured loans that allow borrowers to purchase a home with as low as a 3.5% down payment.

• Borrowers can also get an FHA loan with a score of 500 and above.

• They have high debt-to-income limits, up to 56.9%.

• They are NOT for first time home buyers only.