FHA Loans

Owning a home is the dream for many people. It can offer stability, flexibility and a sense of pride. Finding the right mortgage is an important part of buying a home, and there are several types of loan that you might consider. An FHA loan is one possibility and is an especially good choice for anyone who might find it difficult to get a loan from conventional lenders. They offer a number of benefits, including allowing for low down payments and approval for people with low credit scores. They can be used to purchase different types of property, from single-family home to multi-unit properties.

What Is an FHA Loan?

An FHA loan has U.S. Federal Housing Administration guarantees. The loan is provided by a private lender, but the FHA will pay the lender if you fail to repay your loan. Lenders are then willing to take bigger risks and lend to people who they might otherwise not approve for a loan. An FHA loan conforms to Housing and Urban Development (HUD) guidelines regarding credit worthiness determination and usually allows the lowest FICO credit scores, which can be as low as 500. Interest rates also tend to be lower thanks to the government backing.

How Can an FHA Loan Be Used?

You can usually only have one FHA loan because they are designed to be used on primary residences, rather than second homes or investment properties. They can be used to buy different types of property, and are also available to draw equity, renovate or lower the payments on an existing home. If you have an existing FHA loan, it makes it possible to streamline refinancing and eliminate appraisal, debt observation and income qualification to get approved.

What Benefits Do FHA Loans Offer?

Choosing an FHA loan to mortgage your home means that you can access funding that you could struggle to access without it. With less stringent requirements for credit scores and more relaxed debt to income calculations, you can fulfil your dream of owning a home even when you thought you might not be able to. You will typically find a higher loan to value rate than with Fannie Mae/Freddie Mac products. Plus, an FHA loan can be used for home improvements, as well as for purchasing a property. There’s no minimum income, and also no maximum income, which you can find with some first-time homebuyer products.

Getting Approved for an FHA Loan

If you want to be approved for an FHA mortgage, there are several things to consider.

  • People with lower credit scores are more likely to be approved – other loans might be more suitable if you have a higher credit score
  • Debt to income ratios are more relaxed but still need to be reasonable
  • Your FHA loan should be insured against your primary residence
  • Upfront and monthly mortgage insurance apply to FHA loans and go to the FHA to insure against default

FHA loans provide an alternative mortgage option for people who might find more conventional loans difficult to secure. Please reach out to Steve Ruben and his team at Fidelity First Florida for any questions or to discuss options for your needs.