FHA Loans

What Are FHA Loans?

FHA- The Federal Housing Administration backs and insures certain types of mortgages based on certain consumer profiles. Generally speaking, FHA offers credit leniency and some mortgage lenders have options that offer mortgages for credit scores as low as 540 mid FICO (Fair Issac 5). (with restrictions, such as 10% down, for example) Due to this leniency, there are also property restrictions for the home itself, such as the condition must be what FHA has defined as “habitable”. This definition of habitable includes watch items an appraiser must look out for, which is why FHA requires certain appraisers to appraise the homes if an FHA loan is being obtained. (examples of things an appraiser looks for are holes in soffits or ceilings, rodents or infestations, mold, wood rot, the presence of a stove, functioning toilets or HVAC, etc) and sometimes these extra appraisal add-ons can cause a seller to be wary. There are many other critical reasons to ensure your lender and realtor team work together flawlessly if you want to be competitive in today’s market!

Different Interest Rates

Interest rates for FHA tend to be lower than conventional but the mortgage insurance is slightly higher and if you’re planning to put less than 10% down, it’s LIFELONG whereas on conventional financing options the MI can fall off (*with effort and restrictions such as a minimum of two years having passed and an appraisal required for example). There is a misconception that first time homebuyers qualify for this type of loan only but be wary of falling into stereotypes by using a lazy or inexperienced lender or bank to finance your home because the banks can often make more money on the back end for these types of loans. 

Loan Limits

There are loan amount limits based on each county, (limits can be searched with this link; FHA Mortgage Limits List – FHA Forward (hud.gov) ) and

Also debt to income ratio limits which depend on the financial situation and loan type but generally speaking allow for a slightly higher threshold when compared to conventional.

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