WHAT IS AN FHA LOAN?

An FHA loan is a mortgage loan that is 100% insured by the Federal Housing Administration. Since FHA loans are insured, lenders tend to be more forgiving on their guidelines and qualifying factors when it comes to qualifying for an FHA loan.

AM I THE RIGHT FIT FOR AN FHA LOAN?

Like stated above, FHA loans are backed by the federal government and for this reason can tend to be slightly more forgiving on the qualifying factors. FHA loan guidelines allow for a minimum credit score of 500, a maximum debt-to-income ratio of 43% (Using manual underwriting guidelines) and a down payment as low as 3.5%. FHA loans are typically a good fit for borrowers with a below average credit profile or a higher debt-to-income ratio. However, this is not always the case. The main difference with an FHA loan and a conventional loan would be the mortgage insurance requirements. Conventional private mortgage insurance is priced using a risk-based algorithm. FHA monthly mortgage insurance is capped at .85% (or .80% with 5% or more as a down payment). So, even if you meet the credit score and debt-to-income ratio requirements for a conventional loan, an FHA loan may be more cost effective for you on the monthly mortgage payment. The best way to determine if you are a good fit for an FHA loan would be to schedule a consultation with a certified mortgage planner. You can contact us to schedule an appointment here!

FHA LOAN TIPS:

Do not think FHA loans are only for first time home buyers

Do not assume FHA loans are for low credit profiles

Remember that FHA loans only require a 3.5% down payment

Too see if an FHA loan is a good option for you, click here to schedule a consultation with a certified mortgage planner.

*Please visit our Disclosures page for more details for all loan types.