What is an FHA Loan?
An FHA loan is a government-backed mortgage that the Federal Housing Administration (FHA) insures and is designed for low-to-moderate-income borrowers. FHA loans have more flexible lending requirements than conventional loans.
FHA Loan Requirements: How to Qualify
Since FHA loans have more flexible underwriting guidelines, they may appeal to many first-time homebuyers with smaller down payments or lower credit scores. The below lists some basic requirements a borrower must meet to qualify for an FHA loan.
- Down Payment
- Credit Score
- Typically, the minimum credit score allowed is around 600. If you have a higher credit score, you may be entitled to put less down on the home. A lower credit score will require a higher down payment.
- Mortgage Insurance
- Income History
- The mortgage lender will want to see that you have a steady income and employment history.
- Monthly Debts
What are the FHA Loan Limits?
FHA loan limits are based on the conforming loan limits, which vary based on the housing type, state, and the country in which the property is located. The loan amount is required to be less than $548,250 in some counties and $822,375 in high-cost areas. Contact a mortgage specialist to learn more about the FHA loan limits in your area.
Benefits of FHA Loans
There are many benefits associated with getting an FHA loan, including:
- Allowing more people access to homeownership by allowing for smaller down payment amounts.
- Help homebuyers with lower credit scores qualify for a loan.
- Multiple loan terms available: 30-year fixed-rate, 15-year, etc.
- Available on 1-4 family dwellings.
Types of FHA Loans
GuardHill offers 203(b) and 203(k) FHA loans.
- 203(b) FHA Loans
203(b) FHA loans are traditional FHA loans that allow you to purchase a home with a down payment of as little as 3.5%. This type of loan may be eligible for single-family residences, second homes, or multi-family properties.
- 203(k) FHA Loans
This type of FHA loan is a program that allows you to finance a home that requires renovations and repairs and wraps the costs into your mortgage. 203(K) loans appeal to homebuyers looking to purchase a fixer-upper home.
FHA vs. Conventional
The federal government does not back conventional mortgages, and thus, those loans may have stricter lending requirements. FHA loans typically have a lower down payment, credit, and income requirements than conventional loans.