FHA mortgages offer a wide range of benefits and consumer protection that conventional loans may lack. Some of the most attractive things about an FHA mortgage are the low down payment and more lenient credit requirements. FHA loans are, simply put, easier to qualify for than conventional mortgages.
FHA loans are insured by the Federal Housing Administration. FHA does not lend money or issue credit, so the first requirement of the FHA loan program is to apply for the FHA mortgage by calling us or applying online.
Down Payments and FHA Mortgage Insurance
All FHA home loans require a down payment. Those eligible for maximum financing must provide at least 3.5% of the sales price of the home as a down payment.
For most FHA home loans, the borrower must pay:
- An Up Front Mortgage Insurance Premium or UFMIP
- An annual insurance premium, collected in monthly installments.
- The FHA official site states the monthly premium varies by the type of FHA home loan.
- (New purchase home loans may have different requirements than refinancing loans, etc.) The premium is based on the outstanding principal balance.
- Mortgage Insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.
Having less than perfect credit is not a barrier to an FHA home loan. In general borrowers need to have reliable income and have a history for making on-time payments over the last 12 months.
When it comes to issues like personal bankruptcy, foreclosure and other concerns, FHA guidelines are very flexible. Two years must pass after a chapter 7 bankruptcy and at least one year after a chapter 13 bankruptcy. For example, according to FHA guidelines, “a person in Chapter 13 bankruptcy can purchase a home subject to a FHA insured mortgage. Requirements are the applicant (1) must have completed one year of payments as required while under Chapter 13 and (2) must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow.”
Situations like these are handled on a case by case basis. Don’t assume you’re unable to apply, contact us to see how we can help.