FHA Loans
FHA Loans Overview
An FHA mortgage is a loan backed by the Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) that are available to help first-time homebuyers get into a home.
Why FHA Loans?
These government-backed loans are typically available with much lower down payments and usually have lower minimum credit score requirements than a conventional mortgage from a private lender, which makes them a good option for first-time homebuyers or lower-income buyers who haven’t owned a home in the last three years.
Benefits Of FHA Loans
With an FHA mortgage, you can make a down payment as small as 3.5% of the home’s purchase price. This helps home buyers who don’t have a lot of money saved up for a down payment along with home buyers who would rather save money for moving costs, emergency funds, or other needs.
The FHA is generous with respect to using gifts for a down payment. Very few loan programs will allow your entire down payment for a home to come from a gift. The FHA will.
FHA loans can help you get into a home without waiting a year or more for your good credit to reach the “excellent” level.
FHA loans also allow higher debt-to-income ratios.
FHA mortgage limits are set by county or MSA (Metropolitan Statistical Area), and range from $356,362 to $822,375 for single-family homes in most parts of the country.
FHA Loan Requirements
- FHA loans are available to borrowers with a credit score of 580 or higher and a 3.5% down payment. A 10% down payment if your credit score is 500-579
- Private Mortgage Insurance (PMI) is required for all FHA loans.
- A debt-to-income ratio (DTI) of 50% or less
Documented, steady income and employment history - You’ll live in the home as your primary residence
- You have not had a foreclosure in the last three years.