FHA loans, what are they?
An FHA loan is a mortgage loan that is backed by the Federal Housing Administration (FHA). FHA mortgage loans are very popular, especially with first time home buyers because the requirements are less strict than conventional loans. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% of the purchase price and a credit score of 580 or higher. If the borrower's credit score is between 500-579, the down payment increases to 10%. It is important to remember, interest rates are still reflective of the borrowers credit score.
There is one catch to the FHA mortgage loan, mortgage insurance. It requires two kinds of mortgage insurance premiums: one is paid in full upfront, or it can be financed into the mortgage and the other is a monthly payment.
So, who can qualify for a FHA mortgage loan? Below are some key points you will have to meet.
- Borrowers must have a steady employment history or worked for the same employer for the past two years.
- Borrowers must have a valid Social Security number, be of legal age and a lawful resident of the United States.
- Borrowers must pay a minimum down payment of 3.5%.
- Borrowers should have a minimum credit score of 580, you can have a score as low as 500, but it isn't ideal.
- Typically borrowers must be two years out of bankruptcy and three years out of foreclosure and have re-established good credit.
Below are links for more information on FHA mortgage loans and possibly help you get a pre-approval. Please call Grove City Realty if you have any questions, we help buyers work with lenders every day. 724-458-5858