FHA loans are issued by federally qualified lenders certified by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development. FHA mortgage programs are federally backed mortgages designed for low-to-moderate-income borrowers who may have lower than average credit scores making them the ideal option for many first time home buyers.
Why Apply for an FHA Loan?
While an FHA loan my not be your ideal long-term lending solution, many borrowers are able to use them to secure their initial funding while they improve their credit, develop a strong financial history, and wait for market conditions to signal that it is time to refinance. FHA loans are powerful tools for both borrowers and lenders because. . .
- They are generally easier to qualify for than conventional loans.
- They tend to have significantly lower down payment requirements.
- They cannot exceed statutory loan limits.
FHA Loans are accompanied by their own sets of restrictions and requirements. With an FHA loan you may be able to secure your funding with as little as 3.5% down on the property. While you should consult with your Loan Officer to verify, a credit score of at least 580 is needed to to qualify. If you have a credit score that has fallen between 500 and 579, you could still qualify for an FHA loan – with a higher down payment (typically, at least 10% or higher). FHA loans allow for additional flexibility with the sourcing of your down payment. A down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance. As always, your loan officer will help you assess your option in order to help you start your lending process with confidence.