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There are many reasons for homebuyers to investigate an FHA
home purchase. First time homebuyers should explore FHA loan
options because it’s easier to qualify for an FHA home
mortgage. Your loan is guaranteed by the government, making
your application more attractive to lenders. Since the
typical first-time FHA home loan applicant is young and in
the early phases of their careers, chances are they still
have student loans and other debt to content with; an FHA
home mortgage often costs less and is more forgiving of
youthful indiscretions with credit and payments.
FHA home loans don’t require a big down payment at closing
time. For first-time homebuyers this can be a real plus;
that typical borrower in the early stages of a new career
often doesn’t have a lot of money set aside specifically for
purchasing a home. The FHA mortgage requires a low 3.5% down
payment, and that money can come from a variety of sources
including HUD down payment assistance grants.
For first time buyers, closing costs are another issue that
can be a financial drain; typical closing costs for FHA home
loans are around 2% or 3% of the total mortgage. One
advantage when taking out an FHA loan? FHA mortgage terms
may allow you to build in closing costs into your mortgage.
FHA home mortgages aren’t just for first-time home buyers.
FHA refinance loans can help people get out of toxic debt
situations caused by sub-prime mortgages with interest rates
that have spiraled out of control. Are you facing default or
foreclosure on a conventional loan? FHA home mortgage
refinancing is a godsend for those who want to keep their
homes and prevent damage to their credit ratings. There are
several ways to get into an FHA home loan for refinancing.
The advantages include a low fixed rate mortgage guaranteed
by the FHA, predictable FHA mortgage payments and lower
interest rates for those who qualify.
The FHA also provides cash-out refinancing for those who
need financing for things such as college or major home
improvements. An FHA cash-out refinancing mortgage may offer
lower interest rates than traditional home equity financing
loans; you may qualify for one of two FHA mortgage plans
which offer cash-out plans. One offers loan amounts for up
to 95% of the appraised value of the home, another FHA
refinancing loan offers amounts up to 85% of the appraised
value. Each program has its own specific requirements and
rules; talk to your lender to learn what your options are
under FHA cash-out refinancing mortgages.
FHA mortgage loans should take up no more than 29% of your
monthly income, and your loan officer will ask for
verification of your income to make the calculation. While
some people are able to get conventional loans using “stated
income”, requirements for FHA mortgage products such as FHA
refinancing loans require copies of your income tax returns
to verify the actual amount of money you report to the
government. If your job situation has changed since your
last tax filing, you may be able to furnish proof of income
through your new employer.
FHA home loans have requirements for income, debt-to-income
ratios, maximum loan amounts and other details; each type of
FHA loan is unique and must be applied for individually. Ask
your lender for assistance in learning which FHA mortgage is
right for you. If you aren’t satisfied with your current
lender, consider getting applying for an FHA home mortgage
at a new bank. Even if you have an existing home loan, you
can explore your options with FHA refinancing someplace
else.
Apply now for an FHA Purchase Loan.
FHA Mortgage vs. Conventional Loan
FHA Mortgage Qualification
FHA mortgages are, in a nutshell, easier to qualify for than
conventional home loans. FHA loans have a lower credit score
qualification around 620 and many people have qualified for
FHA loans with credit scores down to a 560. The reason being
is FHA insured lenders are concerned with past credit
adversities and more concerned with the borrower’s ability
to repay then current loan. With as low as a 600 credit
score, one can qualify for an FHA home loan and receive the
same great rate (around 5.00%) as someone with a 720 credit
score.
Compared with a Conventional Loan
Conventional loans mainly require a borrower to have a 660
score or better to qualify for their low rates which like
FHA rates are also around 5.00%. With a conventional loan a
credit score below 660 will normally yield a higher interest
rate and monthly payment.
FHA Mortgage Down Payment
FHA mortgages offer the ability to buy a home with a down
payment of only 3.5% with a FICO score down to 580. This is
one the most attractive benefits of FHA home loans, compared
to conventional loans, and makes owning a home practical
feasible. The best part of FHA's low down payment
requirement is that you do not get a rate adjustment for
your credit score. Once you qualify for a FHA loan - you
qualify - and that's it; you get all the benefits of a low
fixed rate and the low down payment option if your credit
score is 620 or 750.
Compared with a Conventional Loan
You may qualify for a conventional loan in some cases with a
lower credit score as well. But, if your credit score is
below 700 you will have to put a down payment of 20%. Why?
Because conventional loans that exceed 80% loan to value
require Private mortgage insurance or PMI. PMI companies
will not issue mortgage insurance on a conventional loan
unless the borrower has a 700 credit score or better.
Apply now for an FHA Purchase Loan.
Information source:
www.fha.com
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