What is a FHA Loan?
An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, an upfront mortgage insurance premium (UFMIP) equal to 1.75 percent of the base loan amount at closing is required, and is normally financed into the total loan amount by the lender and paid to FHA on the borrower’s behalf. There is also a monthly mortgage insurance premium (MIP) which varies based on the amortization term and loan-to-value ratio.
To decide if you qualify for a FHA Mortgage Loan, we will look at:
- Your income and your monthly expenses. Standard debt-to-income ratios are at the discretion of the underwriter for FHA Loans. These ratios may be exceeded with compensation factors.
- Your credit history (this is important, but FHA credit standards are flexible). Your overall pattern rather than to individual problems you may have had.
To be eligible for an FHA mortgage, your monthly housing costs (mortgage principal and interest, property taxes and insurance) must meet a specified percentage of your gross monthly income. Your credit background will be fairly considered. At least a 580 FICO credit score is generally required to obtain an FHA approval. You must also have enough income to pay your housing costs plus all additional monthly debt.
FHA Loans require the home buyer to invest at least 3.5% of the sales price in cash for the down payment and closing costs. If the sales price is $200,000 for example, the home buyer must invest at least $7,000.
The interest rate for your home loan will be determined by the type of loan program that you qualify for and your credit score. You might be asking yourself what the formula to calculate interest rates is. Interest rates are driven off of Mortgage Backed Securities (MBS) which are commonly referred to “mortgage bonds”. These values of these bonds determine whether the interest rates rise or fall. Your final rate will determine your payment using the standard calculate mortgage payment formula. Please contact me to see what is today’s lending mortgage rate.
While FHA Mortgage Guidelines allow you to purchase warrantable condos, planned unit developments, modular homes, and 1-4 family residences. FHA Loans can be used to finance primary residences only.
Criteria for FHA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for two years or more, you are eligible to apply for an FHA mortgage. If you have had a Chapter 13 bankruptcy, it must be documented that the credit reputation has been re-established for at least one year to be eligible for a FHA Loan Application.
The maximum amount for an FHA Mortgage Loans are determined by the Maximum loan amount: The maximum loan amount allowed for an FHA Loan varies from county to county. To see what the limit is in the county in which you’re interested, visit the following site https://entp.hud.gov/idapp/html/hicostlook.cfm.
Depending on the state where the property is located, the maximum FHA Mortgage amount will be 90% – 97% of the appraised value of the home or its selling price, whichever is lower.
If you’re not sure if you qualify for a FHA loan, you can contact me for live, customized FHA loan quote by completing the online application or by calling me at 843-375-6611