FHA Loans: Benefits & Eligibility
FHA loans allow you to purchase or refinance a house with financial assitance. These loans are backed by the Federal Housing Administration and have more accepting qualifications compared to other financing options. You will need to go through an FHA lender that may have additional guidelines and requirements, so it is very important to go through a lender that will work best for you. This may be a bank, credit union, or independent mortgage lender.
These loans are designed for people who may not be able to own a house otherwise. These loans have a minimum down payment of 3.5 percent, which is based on the overall cost of the home. Other conventual lenders may ask for a down payment as high as 20 percent. The FHA also lets groups associated with the sale of the home cover some of the borrower’s costs — like an appraisal or other closing expenses. You must be able to demonstrate a level of financial stability, but the program is designed for those who may not be able to find help elsewhere.
FHA Loan Eligibility
In order to be eligible for an FHA loan, you usually need to have a credit score of at least 500, although there are possible exceptions for certain outstanding situations. If you have a credit score between 500 and 579 you need to pay at least 10 percent as a down payment. Every year, the FHA adjustsminimum and maximum loan limits. They vary according to the cost of living in a particular location.
You must be caught up with your federal student loans and income taxes. You cannot have had a foreclosure in the past three years, and you cannot have been in bankruptcy in the past two years. An FHA officer must approve the property to be in accordance with federal guidelines. The home must also be your primary residence. Finally, you need to have proof of employment and a steady income.
There are additional requirements and expectations associated with an FHA loan such as mortgage insurance premium costs. You can decide if you want to pay an annual premium or an upfront premium, both of which will provide a safety net in case you need to default on the loan. The loan is designed so that if you decide to sell your home, then the buyer can take on the loan.
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