An FHA loan can make homeownership a reality for those who are buying their first home, don’t have a long credit history, excellent credit, or a lot of cash to make a down payment. There are still minimum requirements that need to be met to qualify, however they are much less restrictive than requirements for conventional loans. The FHA designed this loan program so more people would be able to obtain a mortgage and own a home. Here are some of the requirements that you need to consider.
- An FHA loan is backed by the Federal Housing Administration which means there is less risk involved for the lender and they are likely to approve more loans.
- The down payment requirement for an FHA loan can be as little as 3.5%.
- You can typically qualify for an FHA loan if you have a minimum credit score of 580.
- Closing costs may be covered using gift funds.
- No matter what your down payment is you must pay a monthly mortgage Insurance Premium. There is also an upfront MIP, which equates to 1.75% of the total loan cost, due at closing. This is the most well-known downside to choosing an FHA loan as it increases the overall loan amount.
- The property must be your primary residence. Therefore, you cannot finance an investment property using an FHA loan.
- The property must be appraised by an FHA-approved appraiser and meet their strict property guidelines.
Learn more about FHA loans
If you’re considering an FHA loan, get in touch with a loan officer with Valiant Mortgage today. They can help walk you through the requirements and determine if this is the right program for you.