April 30, 2019
First-time home buyers should know as much about their home loan options as possible going into the application process.
FHA home loans are a good option to consider when buying your first real estate-do you know how flexible the FHA home loan program is?
FHA Home Loan Basics For New Borrowers
FHA home loans are intended for owner-occupiers who want to purchase a home at least one person obligated on the mortgage will occupy as the full-time residence.
FHA home loans are not need-based mortgage loans, so there is no income cap or other limitations on who can apply.
Some people confuse FHA home loans with USDA mortgages, which are governmnent-backed mortgages that do require income caps and are need based, unlike FHA mortgages.
Who You Borrow Money From With An FHA Mortgage
The Federal Housing Administration offers participating FHA lenders mortgage insurance on loans issued by those FHA-approved lenders. But the FHA itself does not loan you the money for the purchase of your new house; instead the participating lender does.
That is why it is up to the borrower and lender to negotiate interest rates and other terms of the loan rather than talking about them with an FHA representative.
FHA Home Loan Approval Facts And Figures
- The lowest down payments are available to those with FICO scores of at least 580. These financially qualified borrowers are able to pay the lowest 3.5% down payment. It is important to remember that this is the FHA minimum standard but lender requirements may be higher.
- Borrowers with FICO scores between 500 and 579 are technically eligible for an FHA loan under the FHA loan minimum guidelines, but would be required to make a 10% down payment.
- For FHA mortgages, a Mortgage Insurance Premium is required , with a duration of 11 years or the lifetime of the loan depending on the LTV and other variables.
- Debt-to-Income Ratios for FHA loan applicants must be lower than 43%.
- The home must be the borrower’s primary residence, and there is an occupancy requirement as a condition of loan approval.
- The borrower must have steady income.
- The borrower must have proof of employment.
Talk to a loan officer at a participating FHA lender to learn more about your FHA home loan options, down payment rules, and lender standards.
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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