FHA Loans
FHA loans have been helping people become homeowners since 1934. Some benefits of FHA loans are:
- Low to no down payments (0% – 3.5% down)
- Low closing costs
- Easy credit qualifying, with credit score as low as 500 with 10% down. 580 score needed for 3.5% down.
What does FHA have for you?
Buying your first home?
FHA might be just what you need. Your down payment can be as low as 0%. Available on 1-4 unit properties.
Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs – all in one loan. (FHA 203-K)
Financial help for seniors
Are you 62 or older? Do you live in your home? If you can answer “yes” to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.
Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.
How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile (manufactured) homes and factory-built housing. You must own the land.
FHA tends to be more lenient on areas such as credit, funds to close and co-borrowers.
Most loans use a method of analyzing credit called credit scoring in the underwriting process. Studies have demonstrated a direct relationship between low credit scores and higher mortgage delinquency rates. As a result many lenders have established minimum credit scores at which they will accept loans. Our lenders have a minimum credit score of 500. Unfortunately, a lack of credit, old delinquencies or incorrect information on the credit report can cause a low credit score. FHA minimum credit score is 500. Although a high credit score may assist in getting the mortgage approved, a low score is not automatically cause for denial. If the credit scores are low, then it is up to the borrower to demonstrate his/her ability and willingness to pay the loan back. This allows the borrower to explain the circumstances surrounding the credit difficulties and have that explanation considered in the underwriting process. This process is called manual underwriting, which our investors allow.
The underwriter on an FHA loan will review the credit and payment history of a customer concentrating on the most recent 12 to 24 months. If the customer has had a decent payment record over the past 12 to 24 months they can often get approved for a mortgage even when Conventional financing has turned them down. An experienced loan officer can help the customer clearly tell their story and will often make suggestions as to how to make the file more acceptable to FHA. Because of FHA’s leniency, some borrowers with past credit problems elect to use FHA. FHA tends to be more flexible than Conventional financing when trying to purchase or refinance a home.
With an FHA mortgage the customer may put down as little as 0%. Keep in mind, however, that the total cost to close on an FHA is commonly 0 – 3.5%. With the down payment, closing costs, money to establish escrows for taxes and insurance plus interest to finish out the month of closing.
The interest rate that you select will also have a bearing on the total costs. If you select a lower rate so that you can reduce your payment, you may end up paying additional money towards “points”. At the same time if you are comfortable with a slightly higher payment you may find a lender that is willing to reduce the costs to close in favor of a higher interest rate.
FHA allows the borrower to get the funds necessary to close from several sources. They include such areas as personal savings, gifts, grants, loans from retirement accounts and seller contributions.
