A Federal Housing Administration (FHA) loan is a loan insured by the FHA, which is a subset of the Department of Housing and Urban Development (HUD). These loans provide homebuyers with lower down payments and closing costs. FHA loans are offered for prospective homeowners who have suboptimal credit scores, are in need of financial assistance, and would not usually qualify for other mortgage loans. MyLendingPal assists in providing FHA loans in Florida and Georgia to people who are seeking to buy a home.
What To Expect With An FHA Loan
Prospective homeowners who do not have high rates of income and cannot make large down payments can use FHA loans to secure a mortgage. The down payments on FHA loans are typically around 3.5% of the total mortgage, which allows low-income homebuyers to save money and start the process of owning their home. These loans do, however, require mortgage insurance to protect in case of a default.
The percentage of the mortgage required for down payment on FHA loans do still depend on the credit score of the applicant. Individuals with credit scores of 500 can still qualify for these loans, however they should expect a down payment of 10% of the total mortgage. This down payment may drop as low as 3.5% for individuals with a credit score of 580 or above. Previous homeowners who have experienced foreclosure or bankruptcy can potentially qualify for an FHA loan; however, this previous experience affects their credit score and the interest rate on the loan. Individuals with credit scores below 500 are unable to qualify for FHA loans.
Mortgage Insurance For FHA Loans
As previously mentioned, FHA loans require mortgage insurance. This is to protect investors from borrowers defaulting on mortgage payments. Borrowers must obtain a mortgage insurance policy with a premium of 1.75% of the loan before they are able to successfully take out an FHA loan. The insurance premiums are automatically added to the mortgage payments and potential FHA loan borrowers should plan to be responsible for both the cost of the mortgage payments and an additional 0.45-1.05% of the loan amount.
Who Can Get An FHA Loan?
FHA loan applicants are offered to US citizens and lawful permanent residents. Borrowers must have a valid Social Security Number, be eligible to work in the United States, and must use the property for which they are applying for an FHA loan as their primary residence.
FHA loan applicants must also provide proof of income or a 2 year history of gainful employment under the same employer. Applicants may be self-employed as long as they provide proof of income, tax returns which show a current profit and loss statement, and a year-to-date balance sheet. Applicants may not have declared bankruptcy within the last two years, and bankruptcies over two years in the past must be proven to be uncontrollable and unlikely to recur.
What FHA Loans Cover
FHA loans are used for homes which the homeowners will be fixing and improving by using the saved money from lower closing costs and interest rates. This can include refurbishment or green energy improvements. FHA loans can cover both mobile and manufactured homes.
The Application Process
To apply for an FHA loan, a prospective applicant must find a lender approved by the FHA. MyLendingPal is approved by the FHA and helps applicants fill and obtain FHA loan applications with the best possible rates. MyLendingPal can work with you to get pre-approved for the best FHA loans possible under your credit score, debts, and income.
Under FHA loans, closing costs are ineligible to be included in the final loan amount. These can be paid by the seller or lender, guaranteed by a cosigner, or as a gift from an employer, family member, or down payment assistance group.
Talk To MyLendingPal Today
FHA loans are a great option for individuals who have low credit or are in need of financial assistance. MyLendingPal is here to help get you pre-approved and qualify for the best terms for you to speed you on the way to home ownership. We will work with you through every step of the loan process; you do not have to navigate the complicated process of buying a home alone. Contact MyLendingPal today to get started on applying for an FHA loan.