Introduction
Why an FHA Mortgage Loan Might be
Right for You If you're considering a home loan, you may want to check out the
Federal Housing Administration (FHA). An FHA Mortgage Loan is a type of
mortgage that's backed by the government and insured by the National Mortgage
Insurance Corporation (NMI). Convenience and low interest rates are just two of
the benefits that come with an FHA Mortgage Loan.
If you are thinking about an FHA
mortgage loan, there may be more reasons to consider than just simply getting
the lowest interest rate. On top of that, if you are planning on selling your
home in the future some advantages of using an FHA mortgage loan can help
protect you from getting into a situation where you'd have to pay more than
what you originally took out for your home.
You
want to buy a home with a low down payment.
There are several reasons why you
might want to get an FHA loan. The most obvious is because you want to buy a
home with a low down payment.
You do not need much money to
qualify for an FHA loan. In fact, the minimum down payment on an FHA-insured
loan is 3.5 percent of the purchase price of the home or condos. You can also
put down less than that amount if you have special circumstances such as a cash
gift from your parents, life insurance or a disability income insurance policy.
Some people think it makes sense to
use their savings account as part of their down payment. This is not allowed
under Federal Housing Administration guidelines, however. A savings account
cannot be used for more than one year's worth of mortgage payments, which means
it would only cover about two months' worth of payments if it was deposited in
October and cashed in December without ever being withdrawn from the account
again.
You
have a credit score in the low- to mid-600s.
If you have a low credit score, you
may be denied for an FHA mortgage loan. But if you are willing to pay higher
interest rates on your new mortgage, you could qualify for one of the loans
that has lower down payments and fees.
A low credit score means that your
chances of getting approved for an FHA loan are slim. The minimum credit score
required to get approved is 660, but some lenders require 720 or above.
You might be able to get approved
with a lower credit score if you have a solid income, good payment history and
stable employment. If any of those things change in the future, you won't be
able to get an FHA mortgage loan without rebuilding your credit score first.
Your
debt-to-income ratio is too high.
If your FHA mortgage loan is denied,
it’s likely because of your debt-to-income ratio.
The FHA requires borrowers to have
at least 3.5% equity in their home, which means that the value of their home
must be greater than or equal to the appraised value of their mortgage.
Your debt-to-income ratio is too
high.
When you apply for an FHA mortgage
loan, lenders will look at your monthly income and expenses to determine if you
can afford to make payments on your loan. If your income falls below a certain
amount, it may disqualify you from receiving an FHA loan as well.
You
can't get approved for a conventional loan.
If you're having trouble getting
approved for a conventional mortgage, an FHA loan might be right for you. You
can't get approved for a conventional loan.
An FHA loan is a government-backed
mortgage that's backed by the Federal Housing Administration (FHA). It's
popular because it's a low-down-payment option and because it offers lower
interest rates than conventional loans.
The FHA has rules and guidelines that
must be followed in order to qualify for an FHA loan. The first step is to
check with your local department of housing and urban development (HUD) office
to see if you have any special requirements or conditions that need to be met
before applying for an FHA loan.
You
want to refinance and you don't have enough equity in your house.
You want to refinance and you don't
have enough equity in your house.
With the right FHA mortgage, you can
save money on the purchase price of your new home. And that could mean a lower
monthly mortgage payment, which means more cash in your pocket.
You want to buy a new home at a
price that's below asking. You don't have much money for down payment or
closing costs.
With an FHA loan, you can put as
little as 3.5% down (on a single-family residence), and FHA will pay for 90% of
the difference between what other lenders charge for similar properties and the
amount owed on your mortgage note (principal).
Flexible
income and debt-to-income requirements.
The FHA loan offers a great way to
get a mortgage that fits your needs. The FHA mortgage loan is a low-down
payment program that offers borrowers with lower credit scores and smaller down
payments the ability to buy a home without having to meet high income
requirements.
This type of loan can be perfect for
first-time buyers or young professionals who are just beginning their careers.
It's also a good option if you have been out of the housing market for a while
and need some time before you can qualify for a conventional mortgage — those
with an FHA loan can take up to six years to pay it off.
Less
strict credit requirements
The FHA mortgage program is one of
the most commonly used mortgage programs across the country, and that's likely
because it offers borrowers with less-than-perfect credit scores access to a
home loan.
The FHA is a government-sponsored
mortgage lender that insures consumers against default. As such, it has strict
requirements for borrowers who want to apply for an FHA loan.
These requirements are meant to make
sure that the house buyers purchasing homes through the agency aren't just
anyone who is willing to put down money on a house but rather people who can
prove they can afford to pay back the loan.
Here are some of those requirements:
- The borrower must have a credit score of at least 580.
- The borrower must have a debt-to-income ratio of 43
percent or less.
- The borrower must have at least 12 months of income in
his or her name as proof of ability to repay the loan (this number will
also include any joint income).
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