FHA Loans & You: What You Need to Know
When purchasing a home at the Lake of the Ozarks, an FHA mortgage is an attractive option for anyone who is looking for an option that allows a down payment of 3.5%. If you qualify, the opportunity to come up with a lower down payment and the reduced/limited closing costs is a great benefit to any home buyer. This week, MHQ Mortgage Headquarters is sharing with you some information on FHA loans and what you need to know as a consumer.
What is a FHA Loan?
An FHA Loan is a mortgage that's insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers. FHA loans are also a good option for homebuyers who may not be able to make a large down payment. Even borrowers who have suffered from bankruptcy or foreclosures may qualify for an FHA-backed mortgage.
Credit Score Requirements
FHA Loan applicants must have a minimum FICO® score of 580 to qualify for the low down payment advantage which is currently at 3.5%. If your credit score is below 580, the down payment requirement is 10%. Your credit score helps lenders determine eligibility based on a borrower’s payment history, bankruptcies, foreclosures, and extenuating circumstances that keep applicants from making timely payments. The higher the score, the better your chances are of getting a lower interest rate on your mortgage.
FHA Mortgage Insurance Premium
Most FHA mortgage loans today require an Up Front Mortgage Insurance Premium (UFMIP) and an annual mortgage insurance premium which is paid in installments over 12 months. The monthly payment is considered part of your monthly mortgage obligation. FHA MIPs are set by the Federal Housing Administration at different rates depending on the borrower's loan-to-value ratio. Unlike with a conventional loan where you may have Private Mortgage Insurance (PMI), you're unable to eliminate MIP for several years unless you refinance the loan into a conventional loan.
No Cash Back
Sometimes a borrower may want to take out more than the cost of the home and closing costs to help with expected home improvement costs or other expenses. When a borrower applies for a conventional loan, this may be an option to them. However, FHA mortgages cannot be used as a personal loan, so funds will not be approved for more than the closing costs required, unless you are due a refund for something paid up front but later financed into the loan.
Occupancy Requirements
FHA home loans (new purchase mortgages, One-time Close construction loans, 203(k) rehab loans, and others) require the borrower to be an owner/occupier of the property secured by the FHA mortgage. When it comes to U.S. residency issues, the borrowers do not have to be United States citizens. FHA loan rules state that the applicant must be in the U.S. legally and have documentation to prove it. That means resident aliens and nonresident alien loan applicants are permitted.
Your Trusted Lake of the Ozarks Mortgage Lender
What is a FHA Loan?
An FHA Loan is a mortgage that's insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers. FHA loans are also a good option for homebuyers who may not be able to make a large down payment. Even borrowers who have suffered from bankruptcy or foreclosures may qualify for an FHA-backed mortgage.
Credit Score Requirements
FHA Loan applicants must have a minimum FICO® score of 580 to qualify for the low down payment advantage which is currently at 3.5%. If your credit score is below 580, the down payment requirement is 10%. Your credit score helps lenders determine eligibility based on a borrower’s payment history, bankruptcies, foreclosures, and extenuating circumstances that keep applicants from making timely payments. The higher the score, the better your chances are of getting a lower interest rate on your mortgage.
FHA Mortgage Insurance Premium
Most FHA mortgage loans today require an Up Front Mortgage Insurance Premium (UFMIP) and an annual mortgage insurance premium which is paid in installments over 12 months. The monthly payment is considered part of your monthly mortgage obligation. FHA MIPs are set by the Federal Housing Administration at different rates depending on the borrower's loan-to-value ratio. Unlike with a conventional loan where you may have Private Mortgage Insurance (PMI), you're unable to eliminate MIP for several years unless you refinance the loan into a conventional loan.
No Cash Back
Sometimes a borrower may want to take out more than the cost of the home and closing costs to help with expected home improvement costs or other expenses. When a borrower applies for a conventional loan, this may be an option to them. However, FHA mortgages cannot be used as a personal loan, so funds will not be approved for more than the closing costs required, unless you are due a refund for something paid up front but later financed into the loan.
Occupancy RequirementsFHA home loans (new purchase mortgages, One-time Close construction loans, 203(k) rehab loans, and others) require the borrower to be an owner/occupier of the property secured by the FHA mortgage. When it comes to U.S. residency issues, the borrowers do not have to be United States citizens. FHA loan rules state that the applicant must be in the U.S. legally and have documentation to prove it. That means resident aliens and nonresident alien loan applicants are permitted.
Your Trusted Lake of the Ozarks Mortgage Lender
At MHQ - Mortgage HeadQuarters, we find FHA Loans to be a great source of funding for our clients. We can share our knowledge and experience with FHA loans, making it easier to compare to conventional financing. So, if you're in need of a mortgage for a new home or have any questions pertaining to FHA mortgage lending, trust in the mortgage professionals at MHQ - Mortgage HeadQuarters to have your best interest in mind. We can help you choose a mortgage program that's right for you and your specific needs!
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