FHA Loans In A Nutshell

Dated: 05/14/2017

Views: 113

FHA loans are a great help to many first time home buyers. By offering mortgages with far lower down payments, the FHA loan is an amazing route to consider when buying. While this is a benefit for many, recent changes in the approval policay may have put the loans just out of reach for some future homeowners with less than favorable credit history.

The breakdown:

FICO Scores  (Image Credit: https://www.fha.com/fha_credit_requirements) 

Applicants with a credit score of 580 or higher can qualify for the low down payment advantage and may only be required to bring 3.5% down. Those with a lower credit score than 580 are not excluded from the FHA loan eligibility, however they will have to bring 10% down payment if they want to qualify for the loan.  

So those of you planning to purchase a home with a slightly lower credit score, you may want to consider the pros and cons of having to put down a larger down payment or using the funds to first improve your credit score.

Why FHA Loans?

FHA loans are popular because homeowners that use them are able to utilize the benefits and protections which FHA loans provide which are unavailable with other traditional mortgage loans. Loans through the FHA are government insured so lenders are generally more lenient. A few of benefits you can expect with an FHA loan are as follows:

  • Easier to QualifyWhile most loans exclude applicants with questionable credit history and low credit scores, the FHA makes loans available with lower requirements so its easier for you to qualify.

  • Competitive Interest RatesYou've heard the horror stories of subprime borrowers who couldn't keep up with their mortgage interest rates. Well, FHA loans usually offer lower interest rates to help homeowners afford housing payments.

  • Lower FeesIn addition to lower interest rates, you can also enjoy lower costs on other fees like closing costs, mortgage insurance and others.

  • Bankruptcy / ForeclosureJust because you've filed for bankruptcy or suffered a foreclosure in the past few years doesn't mean you're excluded from qualifying for an FHA loan. As long as you meet other requirements that satisfy the FHA, such as re-establishment of good credit, solid payment history, etc., you can still qualify.

  • No CreditThe FHA usually requires two lines of credit for qualifying applicants. If you don't have a sufficient credit history, you can try to qualify through a substitute form.

            (Credit: https://www.fha.com/fha_credit_requirements)

For many buyers, using the FHA loan program can truly make all the difference between owning your dream home comfortably, or entering into a financial disaster. The FHA provides a wealth of other benefits for those who qualify so make sure to research them and take full advantage of them when you buy your new home!Image title

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Alex Sharp

My name is Alex Sharp, I am your local real estate professional serving the greater Colorado Springs area. Whether you’re looking to buy, sell or invest, I am here to devote myself to making your dr....

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