November 14, 2018

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Seven Facts About FHA Home Loans

Seven Facts About FHA Home Loans

Seven facts about FHA home loans you should know include lower credit score requirements and down payments than conventional mortgage counterparts. The other five facts are just as useful to a house hunter as the low down payment and FHA credit score rules.

FHA Home Loan Limits Are Adjusted Yearly And Vary Depending On The Housing Market

Not all housing markets have the same costs or median house prices. A Zillow.com report for home values in 2018 says houses in California may average around $500,000 while homes in Pennsylvania average around $160,000. FHA home loan limits for high-cost and low-cost areas are adjusted rather than featuring an one-size-fits-all approach.

FHA Loan Down Payment Requirements Compared To Conventional Mortgage Loan Requirements

FHA loans specify down payment minimums between 3.5% of the adjusted value of the home to 10% depending on the borrower’s credit rating and other factors. Conventional Mortgages may require as much as 20% down.

FHA Loan Credit Requirements Are Not As Strict As Conventional Mortgages

Because FHA home loans and FHA refinance loans are backed by the government, the lender can afford to be more forgiving when it comes to credit scores. Borrowers should know that a lender’s FICO score requirements may not match the FHA loan requirements-many participating lenders require FICO scores in the mid-600s for the lowest down payment and other terms.

FHA loan rules (not the lender’s rules) say a borrower is technically eligible for an FHA mortgage with FICO scores of 500 to 579 (with 10% down) and FICO scores of 580 or better getting the lowest down payment requirement (3.5%).

FHA Loans Can Refinance Conventional Mortgages For Lower Interest Rates

You may be able to refinance a conventional mortgage into an FHA loan for a lower interest rate depending on your credit, market conditions, and other factors. Ask your participating FHA lender about refinancing out of a conventional mortgage into an FHA loan and how the interest rates may differ.

FHA Loans Allow Certain Closing Costs To Be Paid By The Seller

Sellers can contribute money to approved closing costs and/or origination fees up to six percent of the sales price of the home. Lender requirements and state law may affect how this is done.

FHA Loans Come In Adjustable Rates and Fixed Rate Versions

You can apply for a fixed rate FHA mortgage or an adjustable rate loan if the participating FHA lender agrees to offer it. Borrowers who choose adjustable rate mortgages are often not planning on staying in their home for the full duration of the loan term or may be planning to refinance again to a fixed rate once the lowest rates on the adjustable rate mortgage have been adjusted.

FHA Loans Are Available To All Financially Qualified Borrowers

You do not have to be a first time home buyer to qualify for an FHA mortgage loan, and there is no need-based restriction on FHA mortgages. You can be in any income bracket and successfully apply for an FHA loan or refinance loan as long as you are financially qualified and can afford the mortgage.

 

Joe Wallace - Staff Writer

By Joe Wallace

July 3, 2018

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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