Who are FHA loans good for? It’s an excellent question and the answer might surprise you. FHA mortgages are often thought of as “helper loans” due to a misconception that FHA mortgages are specifically for first time home buyers, economically disadvantaged people, or new families. What’s the truth?
FHA Loans Are Available To All Financially Qualified Applicants
There is no minimum income limit OR “maximum income” cutoff for FHA home loans. A borrower cannot earn “too much money” and be disqualified as a result. FHA home loans are for anyone who meets the minimum FICO score requirements, has a reliable payment history on all financial obligations, and can show that their employment is stable and likely to continue.
FHA Loans Are For All Types Of Borrowers
Some mistakenly believe that FHA mortgages are specifically for first-time home buyers. While FHA mortgages do offer an advantage for first time buyers in the form of lower interest rates and lower down payment requirements, someone who already owns or who has previously owned property may also apply and get the exact same consideration for loan approval as a first time home buyer.
Some financial institutions may offer first-time home buyer incentives, but the FHA program itself does not. So it’s nothing to worry about if you’ve owned property before and want to apply for an FHA mortgage loan. FHA loan rules don’t specify different interest rates or other terms for first-time home buyers.
FHA Loans Have Low Down Payment Requirements
Conventional loans may require borrowers to, depending on circumstances, put down 10% or higher. FHA mortgage loans feature a low 3.5% down payment requirement for borrowers with qualifying FICO scores. For the FHA program itself, 580 is the minimum FICO score you can have and still be eligible for the 3.5% down payment option. Your participating lender may have higher FICO score requirements-check with your chosen lender to see what is possible in terms of your credit scores and your down payment amount.
FHA Loans Are Good For Owner-Occupiers
FHA mortgages are only for those who intend to occupy the home after loan closing and use it as their primary residence. A borrower can purchase homes with one to four units and renting out the unused units is permitted. But you must live on the property as a condition of loan approval.