An FHA loan provides a government-insured loan with flexible loan options. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with as little as 3.5% down.

What is an FHA loan?

FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders, such as banks and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers can qualify for a new home with as little as a 3.5% down payment.

Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance (PMI). This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment and sometimes is able to be removed once your home equity reaches 20%. Additional scrutiny is often required during the loan application process using an FHA loan.

What is required for an FHA loan?

Many of the same documents are required for an FHA loan that any lender will want to see:  employment history, appraisal, debt-to-income ratio. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.

Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations. You can even use your rental history to qualify!

How FHA Loans Work

• – Purchase your home with as little as 3.5% down payment.
• – 30, 25, 20, and 15 year terms are available with fixed rates.
• – 5 and 7 year adjustable rate mortgages available.
• – Pay your mortgage off at any time without pre-payment penalties.
• – Grant and Down Payment Assistance programs are available!

Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.

*The Barefoot Mortgage Group is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.