An FHA Home Loan may get you into a home with a low down payment. An FHA loan provides a government-insured loan with flexible loan options. One of the biggest hurdles that first time homebuyers face is saving up for a sizable down payment on a home. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.
What is an FHA loan?
FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers may get into a new home with as little as 3.5% down and lower credit score requirements than conventional loans.
FHA loans are backed by the U.S. government and collect an Upfront Mortgage Insurance Premium as well as a Monthly Insurance Premium to cover the risk of the low down payment. Additional scrutiny is often required during the loan application process using an FHA loan.
What is required for an FHA loan?
Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ratio. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.
Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations.
How FHA Loans Work
- Purchase your home with as little as 3.5% down payment
- 30-, 25-, 20- and 15-year terms are all available with fixed rates.
- 5-year adjustable rate mortgage available.
- Pay your mortgage off at any time without pre-payment penalties.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**Fairway Financial Services, Inc. is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.