FHA Loans

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
    • Down payments for FHA loans may be as low as 3.5% of the purchase price. However, the down payment amount may be dependent on your credit score. Plus, if you are having trouble saving for a down payment, gift funds may be allowed.
  • 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
    • Mortgage insurance is required for all FHA loans. The insurance is required to be paid upfront (at closing) and as an annual premium.
  • Income History
    • The mortgage lender will want to see that you have a steady income and employment history.
  • Monthly Debts
    • Your debt-to-income (DTI) ratio should be no more than 43% of your monthly income. Exceptions may be possible depending on your credit score, monthly income, and down payment amount. Additionally, your monthly mortgage payment (including PITI) needs to be less than 31% of your gross monthly income.

 

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.

 

Why Choose GuardHill?

GuardHill has over 29 years of mortgage financing experience and specializes in providing standard and out-of-the-box financing solutions for our customers. GuardHill works with numerous investors and lenders and offers various loan programs to provide borrowers with the best financing solutions possible.

Contact us to learn more about if an FHA loan is right for you or to get started!