FHA home loans make homeownership a reality for those with low to moderate incomes and poor credit scores. Since FHA loans are insured by the Federal Housing Administration, lenders usually don’t have very stringent eligibility requirements. Here are some interesting facts about FHA home loans that can give you an understanding of how they work and how they can help you:
Lenient Eligibility Requirements
Eligibility requirements for FHA loans are usually more lenient. The basic requirements are that the applicant should have a credit score of at least 500, be able to make a down payment of 3.5%, have a debt-to-income ratio of under 50%, and meet the FHA’s property standards.
Mortgage Insurance Is Required
All FHA home loan borrowers need to mandatorily get mortgage insurance. However, the mortgage insurance term will vary based on the amount of down payment you make. If you put down at least 10% as down payment, you’ll need to get an FHA mortgage insurance cover for 11 years. If your down payment is lesser than 10%, the insurance cover will last as long as the loan term.
Loan Terms May Vary Based on The Lender
While the FHA has lenient eligibility requirements, lenders who offer these loans may have their own requirements that you will need to meet to get approved for the loan.
FHA Loans Can Help with Home Improvement
FHA loans are not meant only for new home purchases. The Federal Housing Administration also offers loans like the FHA 203(k), FHA 203(k) Refinance, FHA Energy Efficient Mortgage, and FHA Title 1 Loan that can help you finance your renovations expenses.
No Restrictions on The Type of House You Can Purchase
FHA home loans can be taken to purchase single-family homes, multi-family homes, and even manufactured homes. However, regardless of the type of home you purchase, you will need to use the home as your primary residence.
You Can Get an FHA Reverse Mortgage Loan
If you own a home or have a large equity in the home and are at least 62 years old, you may qualify for the FHA reverse mortgage program that helps homeowners borrow funds against their home equity.
These are some of the many facts about FHA home loans. Ensure that you do your research about FHA loans if you are considering it as an option.
