FHA is currently the go-to program for many home buyers especially first time home buyers because it allows buyer to purchase a home with less an 20% down (typically home loans require at least 20% down) and less than perfect credit scores and higher debt to income ratios. Rates are typically lower than conventional rates and have less closing costs than conventional loans. With an FHA loan you can have less than par credit scores down to 580 you can still put as low as 3.5% down payment and enjoy 30 year fixed rates. I think FHA is a more forgiving option and rates are better than conventional rates. FHA allows 100% gift funds from family members and non-occupying co-borrowers to help with qualifying – This makes it ideal for young buyers like recent college graduates.
What is an FHA Loan
FHA home loans are mortgages that are insured by the Federal Housing Administration, a Government agency.
Down Payment Requirements
FHA allows for as little as 3.5% down payment. If your credit score is as low as 500 you may still qualify for an FHA loan but need 10% down.
Home Sale Price Limit
For 2018 FHA loan limits were raised to $384,100 which calculates to a sales price estimate of $398,000 with as little 3.5% down. This sale price makes FHA an option for many home buyers in Austin.
As with any loan program, the better your score the better your options, however one of the benefits of an FHA is that you may still qualify for an FHA loan if your credit score isn’t great. When your score is in the low 500s, you may be required to put 10% down and your interest rate will be a little higher. One thing I always tell people, is that in mortgage lending, credit is king. The better your credit the better your options. Talk to me about improving your credit score.
Must occupy the home as primary residence
At least 18 years of age
Mortgage insurance (MIP) is required
An appraisal must be done by an FHA approved appraiser