Financial Tidbits: FHA Loan

Every so often we stumble upon some interesting, wise or commonly unknown financial information that we think homeowners should know. We'll be sharing these things on our Financial Tidbits blog posts and hope that you learn something new!

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You’ve selected your Green Park dream home. The Cape Cod beautifully nestled on the corner of Sausalito Street and Monterey Avenue. And then you start to wonder, “Can I really afford a new home?” Or maybe “My credit score is not so perfect, how will I qualify for a loan”. Don’t let these frustrating circumstances get you down. In fact, there are solutions out there and one of them just may be the FHA loan.

An FHA (Federal Housing Administration) loan is a mortgage loan provided by an FHA approved lender. Each loan is insured by the FHA which helps to reduce the possibility of a loss if the borrower were unable to make their mortgage payment. FHA loans have become increasingly popular, especially amongst borrowers who have low down payments or less than perfect credit.

Some FAQ’s that are common are:

I had a bankruptcy that I went through 2 years ago, would that inhibit me from qualifying for a loan? With an FHA loan, if it’s been more than 2 years since a bankruptcy you can obtain an FHA loan. (Read more here) Foreclosure can also be in a borrower’s history if it has been more than 3 years since the occurrence.

Generally, people perceive good credit as over 700. However, FHA loans will accept a minimum score of 580 for a 3.5% down payment or 500-579 for a 10% down payment.

There is also the option of gifting. Gift funds from friends or family (with limitations, read more here) can be used for the down payment and closing costs among other things.

I am not a first time home buyer, isn’t a FHA loan for First time home buyers? This is not a necessary qualification for an FHA loan. However, the loan is only available for the primary occupant of the new home.

With flexible lending requirements, an FHA loan is a great option for many people. Contact us today to learn more about FHA loans and affording your own home.

http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-188

http://www.zillow.com/mortgage-rates/finding-the-right-loan/fha-loan/

http://www.quickenloans.com/blog/fha-loan

https://www.lendingtree.com/fha-loans-index

http://www.fha.com/fha_article?id=441