This article is a guide to the FHA loan, an option for those who want a low down-payment on their home and are looking for a government guaranteed loan.
What is a FHA loan?
A FHA loan is a mortgage loan that is issued by the Federal Housing Administration. It has soft credit requirements, low-interest rates and low down payment requirements.
FHA loans are available to home buyers with lower-incomes. They make up to 3 types of loans depending on the buyer’s qualifications. There are two types of FHA-backed mortgages: a fixed-rate mortgage and an ARM (adjustable rate mortgage).
Pros and Cons of the FHA Loan
The FHA Loan is a type of loan that is backed by the Federal Housing Administration. It provides interest rates as low as 3.00% and requires only a 3.5% down payment, making it possible to obtain a mortgage without putting up a large amount of savings. However, the FHA loan has some limitations. This loan cannot be used for purchasing condominiums or timeshares, and there are no limits on how much debt can be taken on with this loan.
FHA loans are the best option for people who can’t qualify for a conventional mortgage loan. They offer low interest rates to qualified applicants, but there are some drawbacks as well. One of them is that this type of loan requires a significant down payment and closing costs. Another drawback is that it does not allow borrowers to use their own home equity loan or line of credit, so if you have other debts that you need to pay off before borrowing money for the property, the FHA may not be your best option.
Qualifications for the FHA Loan
To qualify for the FHA loan, your down payment must be less than 20% of the total price of the home. You’ll need to have a credit score at least 640 and not exceed 80% of your current gross income. The maximum qualifying loan amount is $292,150 and the minimum qualifying loan amount is $3,375.
The FHA loan is one of the best ways to buy a home. It is especially good for first time buyers and those looking to purchase an affordable home. However, to be eligible for an FHA loan you need to provide certain information about your employment history and finances. There are also requirements for income, assets and down payment. If you meet all the qualifications, it’s important that you secure an FHA loan before you start house hunting.
How to Apply for a FHA Loan
Most first time homebuyers are looking for an affordable mortgage option. The Federal Housing Administration is a great option because it allows borrowers to contribute a smaller down payment and get approved for loans with lower interest rates. These loans allow people to buy homes they may not be able to afford otherwise. To apply, you’ll need to be sure you have the following:
To apply for a FHA loan, you must have a credit score of 620 out of 620 or higher. You’ll also need to provide the following documents: proof of income like your last two years of pay statements, bank statements and tax returns, recent utility bills, property deed, and last year’s tax return.