An FHA loan makes buying a home with little money saved or a less-than perfect credit a reality.
FHA loans allow a down payment of as little as 3.5% on a mortgage. This can make it possible for lower- and middle-income borrowers to buy a house when they don’t qualify for a conventional loan — which has stricter requirements, including a higher credit score and bigger down payment.
The primary benefits of a FHA Purchase are...
- Lower credit score and down payment requirements. Unlike a conventional home loan, FHA credit score requirements are much lower. According to HUD you can technically qualify for an FHA loan with credit scores of at least 580.
- FHA loans can make qualifying easier if you already have existing debt. For conventional loans, you are normally limited to having monthly housing and other debts equaling no more than 36% of your income. With an FHA loan, this number gets raised to 41%.
- FHA loans are assumable. When it comes time to sell, buyers can take over the sellers’ existing FHA loan instead of taking out new one at whatever the current mortgage rate at that time. This is especially beneficial in a rising-rate. environment
How do I qualify?
Some other eligibility requirements include...
- Credit Score. The minimum credit score requirement is typically at least 580 depending on the the wholesaler that is used. However, there are options for those with credit scores between 500 and 579.
- You cannot have either a Chapter 7, or Chapter 13 bankruptcy within the last 2 years.
- A down payment of at least 3.5% is usually needed for an FHA Loan, however, there are down payment assistance products and grants that may be available to help with the burden of down payment.
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Is a FHA Purchase right for you?
Speaking with one of our experience loan help officers can help you further decide the best option, weighting the benefits and drawbacks of loan types so that you can make the best decision for your situation.