An FHA loan provides a government-insured loan with flexible loan options. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.

What Is an FHA loan?

FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders, such as banks and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers may get into a new home with as little as 3.5% down.

Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance. This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment until the amount of the loan reaches 20%. FHA loans, on the other hand, do not require PMI because they are backed by the U.S. government. Additional scrutiny is often required during the loan application process using an FHA loan.

What Is Required for an FHA Loan?

Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, or more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.

Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations.

How FHA Loans Work

• Purchase your home with as little as 3.5% down payment (compared to 20% required on most loans).
• 30-, 25-, 20-, and 15-year terms are all available with fixed rates.
• 5-year adjustable rate mortgages are available.
• Pay your mortgage off at any time without pre-payment penalties.

Is an FHA Loan Right for You?

If you’re in the market for a new home but have limited savings or a lower-than-average credit score, an FHA loan may be the perfect solution for you. Since they offer backing from the Federal Housing Administration, more flexible credit requirements, and also lower down payments, these types of home loans are an attractive option for many first-time homebuyers and those who may not qualify for traditional financing.

However, it’s important to consider your own financial situation when determining if an FHA loan is right for you. By consulting with a mortgage professional at Successful Mortgage you can explore all of your options and determine the loan program that best suits your specific needs and goals.

Still have questions about FHA loans?  Give us a call!  One of our mortgage specialists would be happy to answer all of your questions so you can get started on your homebuying journey.

**Success Mortgage is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA, or the Federal Government.