Call (727) 784-5555
FHA Mortgages
What Is An FHA Loan And Other Frequently Asked Questions
Through the Federal Housing Administration (FHA) loan program, the federal government insures loans backed by FHA-approved lenders to low-to-moderate-income borrowers. The government insurance allows a lower minimum down payment and lower credit scores than many conventional loans for these borrowers.
Want to skip the article and just talk to a professional? Call
(727) 784-5555.
What Are The Pros and Cons Of An FHA Loan?
Pros
- Qualify with a lower credit score. If you have a score of under 680 an FHA loan might be great for you.
- Lower downpayment. If you don't have a lot of money saved for a downpayment FHA offers as little as 3.5% down.
- Higher sellers assist. You can get up to 6% sellers assist to cover closing costs.
Cons
- Premium Mortgage Insurance. You will have to pay a monthly fee for insurance against the loan for the entire life of the loan which increases your monthly payments.
- FHA Funding Fee. You will have additional closing costs to cover the additional risk of defaulting on the loan. This fee changes depending on market conditions.
What do I need to do to qualify for an FHA Loan?
A common misconception about FHA is that it is for first time home buyers only. FHA is a great loan type for first time buyers; however, repeat buyers can also apply for an FHA loan. Here are the current requirements:
- A credit score of at least 580 for a 3.5% down payment
- Premium Mortgage Insurance often referred to as PMI is required
- You must have a Debt-to-Income Ratio less than 45%
- The home must be the primary residence of the borrower
- Borrowers must have employment verification and steady employment history
How much can I borrow with an FHA loan?
FHA loans limits depend on where you are buying. Urban areas with high real estate values can qualify up to $800,000. Lower real estate values can have upper limits in the $300,000s or $400,000s. To find out more about your neighborhood contact us today, or call (727) 784-5555.
Most people do not hit the upper limit of the FHA loan. The real question you need to ask yourself is, how much can I afford? You can't do this alone. Talk to a loan officer and let them verify your income and debts. They will be able to give you a good idea of your targeted monthly payment and your price range.
What is PMI and why do I need PMI (premium mortgage insurance)?
Lenders want protection if you stop paying your loan. PMI gives them that protection. Remember PMI is for the lender not you. But, there's no way around it unless you put 20% equity into the home and go with a conventional loan.
If you would like more information about your loan options, contact us today! Or start your loan application.
