Many young families believe that there isn’t any way that they could afford purchasing a home in today’s economic landscape. Federal Housing Administration (FHA) loans were created to make it possible for low-income borrowers to be able to afford a home.
What is a FHA loan?
FHA loans help low-income borrowers get a loan without making large down payments. In order to obtain a loan that is backed by the Federal Housing Administration, one must go through a FHA-approved lender (such as CityWide Home Loans).
Benefits of a FHA loan
There are a variety of reasons why a person would choose to go with a FHA loan, rather than a conventional loan program. Here are the reasons why FHA loans can help families and individuals who qualify:
Down payments can be as low as 3.5%, if the borrowers credit score is above 580. If it is lower than 580, then the down payment requirement is 10%.
Credit score requirements are more relaxed than for conventional loans, where borrowers need credit scores of at least 620, or usually higher).
Get lower interest rates, despite a lower credit score. FHA loans can help individuals with a credit score of around 660 get the same rate as a conventional loan borrower with a credit score in the mid-700s.
FHA loans can be assumed by a new buyer of a home, down the road, which makes the home easier to sell in a buyer’s market.
Who qualifies for a FHA loan?
Not everyone can qualify for a loan backed by the Federal Housing Agency. Here are some of the criteria that borrowers must meet before they are able to qualify for a FHA loan:
Borrowers must have a credit score with a bare minimum of 500 or higher. However, different lenders will have their own credit requirements to offer a FHA loan.
A borrower must not have declared bankruptcy for at least two years.
A borrower must not have had a foreclosure in the past three years, unless a special exception is made.
A borrower must have no delinquent debt or judgements.
A borrower must have two established credit accounts, at least.
Your debt-to-income ratio must be 50% or less.
Call our experts today, to see if you quality for a FHA loan!