Are you thinking about buying a home but wonder if you have a high enough down payment? Do you worry that your credit score isn’t high enough and that you’ll never get a loan?
Whether you’re a first-time homebuyer or you’ve owned homes before, the FHA loan may be the perfect option for you, here’s why.
FHA Loans Have Flexible Credit Score Requirements
FHA loans have the lowest credit score requirements out of all loan programs available. You can get a loan with a credit score as low as 580. While that’s not an ideal credit score, it’s great to know you can secure a loan even with less than perfect credit.
You only Need a Small Down Payment (or none at all)
FHA loans require a 3.5 percent down payment. If you buy a home for $150,000, you only need $5,250 down. But, there’s better news.
If you don’t have the money yourself, the FHA allows the use of gift funds for 100 percent of the down payment. For example, if your parents want to pay your down payment, they can. You don’t have to put any of your own funds in, but you must use the gift funds process carefully. This means the donors write a gift lender, source their funds’ origination and you provide proof of receipt and deposit in your account.
You can Buy any Type of Property
Many people assume FHA loans are only for ‘perfect’ single-family homes. You can use it on any type of home including, single-family, condos, townhomes, and 1-4 unit homes (as long as you occupy one of the units). In some cases, you may even use it on a manufactured home, but that’s on a case-by-case basis.
The Appraisal Requirements aren’t Tough
Another myth people believe is that the appraisal is impossible to pass. While the FHA has Minimum Property Requirements, they aren’t anything out of the ordinary. They ensure the home is safe, sound, and stable – all things you want out of a home. While FHA appraisers have a specific checklist they follow, all conditions the home must meet are to make sure the home is a good purchase.
Mortgage Insurance Premiums are Low
While you pay mortgage insurance premiums for the life of an FHA loan, they are affordable. The upfront funding fee is a one-time fee, but you pay the annual mortgage insurance fee for the life of the loan. The insurance costs 0.85% of the loan amount and decreases each year as your principal balance decreases.
If you only have 3.5 percent to put down on a home or your credit is less than perfect, consider the FHA loan. It’s an affordable option with flexible guidelines making it easy for first-time and subsequent homebuyers to afford a home.
As long as you’ll live in the home as your primary residence and you meet the basic guidelines, you’ll find it’s much easier to get a loan than you thought.
