What is an FHA Loan
FHA loans are mortgages for primary residences that are offered by approved lenders and are insured by the FHA (Federal Housing Administration).
The Federal Housing Administration does not issue the loan. They set the loan guidelines that the lenders who offer FHA loans must follow. The FHA also insures the loan to protect the lenders in the event of a default by the borrower.
Who are FHA loans for?
FHA loans are for home buyers of a primary residence who require a mortgage that offers one or more of the following benefits:
- Small down payment
- Allows for low credit scores
- Accepts higher debt to income ratios
- Approves borrowers who have had a Chapter 7 or Chapter 13 bankruptcy
- Available with a rehab or construction loan option
If any of these apply to you, then an FHA loan may be what you need. If you would like to discuss and have more questions answered, then just contact us.
What Type of FHA Loans are There?
The FHA has established guidelines for the following types of loans that lenders may choose to offer.
FHA Purchase Loan (203b) – This is for the purchase of a 1-4 family home to be used as a primary residence. It is the most popular of all FHA loans. Read [FHA Loan Requirements]
FHA Refinance – This is a standard refinance of a non-FHA loan into an FHA loan with the purpose of getting a lower rate or moving from an adjustable rate to a fixed rate. Read [FHA Refinance]
FHA Streamline Refinance – This is a refinance of an existing FHA loan with the purpose of getting a lower rate or moving from an adjustable rate to a fixed rate. With the streamline refinance, no income documentation or appraisal is needed. Read [FHA streamline refinance]
FHA Cash Out Refinance – When a homeowner would like to cash out some equity in the home to pay for home improvements, debt consolidation, investments, or any other reason, an FHA cash out refinance is the best option. Read [FHA cash out refinance]
FHA 203k Rehab Loan – If you are buying a home that needs upgrades or home improvements, this loan enables you to borrow the money needed to purchase the home while also including the additional money needed for the improvements or repairs. Read [FHA 203k rehab loans]
FHA One Time Close Construction Loan – The FHA construction loan provides home buyers with an opportunity to use an FHA loan to build their dream home. You can borrow the money needed to purchase the lot and pay for the build all in one loan. Read [FHA One Time Close Construction Loans]
How to Qualify for an FHA Loan
FHA loans are easier to qualify for than other types of mortgages due to the lower credit score requirements and higher DTI thresholds. These are the basic qualification requirements:
- Home being financed must be the borrower’s primary residence
- Two year work history
- Minimum credit score of 500
- Down payment of 3.5% for scores over 580 or 10% down for scores below 580
- Maximum debt to income ratios of 56.9%
If you would like to read all of the requirements on how to qualify for an FHA loan, then Read [FHA Loan Requirements]
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