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Can You Get An FHA Loan To Buy Your Next Home
What is an FHA Loan?
Launched in 1934 to help boost the housing market, the Federal Housing Administration (FHA) loan is still pretty much the same today. It’s a government-backed loan that allows people to buy a moderately priced home with a down payment as low as 3.5 percent. The partnership between the FHA and HUD has helped many people since its inception, insuring over 34 million home mortgages and 47,205 multifamily project mortgages. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. In the 80 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world.
The government doesn’t actually lend the money, but it does insure the mortgages. That way, if the borrower can’t repay the loan, the FHA insurance reimburses the lender. This allows mortgage lenders to offer loans to less affluent applicants who might otherwise be denied.
*Small Down Payment
You can put as little as 3.5% down. It doesn’t even have to be your own money – the down payment can be a gift or loan.
FHA underwriting guidelines are more flexible than conventional (non-government) guidelines.
FHA lenders take what they call “compensating factors” into account when they underwrite loan applications. This can help those who are not perfect on paper but still deserving of a home loan.
*Interest Rates Can Be Lower
FHA loans can be less expensive than non-government loans for people with small down payments or credit issues.
FHA loans are assumable. This feature can help you sell your property if rates are higher in the future.
What's Cheaper? An FHA Loan or a Conforming Loan?
Unlike FHA loans, conforming mortgages are not government-backed. They’re called "conforming" because they must conform to guidelines issued by Fannie Mae and Freddie Mac, to huge companies that buy mortgages from lenders and sell them to investors. About half of all mortgages are conforming loans. Conforming mortgage include community mortgage programs, which allow three percent down payments but have income restrictions.
For most applicants, conforming mortgages are less expensive than FHA home loans. However, those with fair-to-poor credit scores and low down payments might do better with FHA, as might borrowers refinancing with cash out. Have your lender provide estimates for both types when you shop for your mortgage.
FHA Loan Requirements
*Minimum Credit Score of 580
This is for a mortgage with a 3.5 percent down payment. Ten percent down is required for applicants with scores between 500 and 579.
*3.5 Percent Down Payment from an Acceptable Source
Your down payment can come from your savings, a loan or a gift, but not from anyone who would directly benefit from the transaction, such as the seller, agent or lender.
*Documentation of Income
Lenders are required by law to make sure you can afford your mortgage. You’ll have to supply paystubs, W-2s and possibly tax returns.
CAIVRS is the government’s Credit Alert Interactive Verification Reporting System. It’s a database of people who have defaulted on government loans, owe back taxes or have other federal debt. If you turn up on this list, you must be cleared before you can get an FHA loan.
This loan cannot be used to purchase a vacation home or second home. However, FHA financing can be used to buy a primary home for a family member.
Where Do I Find an FHA Lender?
FHA mortgage lenders are not hard to find.
FHA Lenders must be approved through the US Department of Housing and Urban Development (HUD) in order to fund FHA loans.
Nearly all major US banks are FHA-approved and so are many local banks and mortgage brokers.
To find out more about any FHA lender, search by lender name on the HUD website.
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|Featured properties may not be listed by the office/agent presenting this brochure. Information has not been verified, is not guaranteed and is subject to change. The data relating to real estate for sale on this report comes in part from the Internet Data Exchange program of Northern Kentucky MLS.|
At Regional Realty, we are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status, or national origin.
Wendie Neely is licensed in both Kentucky and Ohio. Her background includes several years as a Real Estate Appraiser placing her in a unique position to help Buyers and Sellers understand property val....