Getting your finances in order and knowing your options before house hunting is an important step in the home buying process. But there are several different options available. How do you know which one is right for you? The FHA (Federal Housing Administration) loan is an attractive option and could be THE loan for you – and it’s not just for a first time buyer.
How do you get a loan from the Federal Housing Administration?
You don’t. The FHA doesn’t loan money directly to buyers. Instead, they insure private lender (such as PRMG). The FHA-approved lender has the final say about whether or not you will be approved for financing.
Who can get an FHA loan?
Anyone that meets the requirements. Generally, that means you will need to prove:
- The monthly mortgage payment will be less than 31% of your monthly income. It’s important to keep in mind your monthly payment includes interest, taxes, insurance, PMI and principal.
- Satisfactory credit score/credit history
- You are a US citizen
Your lender will have additional requirements that may apply to you, your down payment and the property you’re buying.
Why go FHA?
There are a few reasons that make an FHA loan attractive to home buyers including:
- Potentially lower closing costs. An FHA loan allows up to 6% in seller credit to help cover closing costs.
- Low down payment. You may only need 3.5% down vs 10 – 20% you may otherwise needed. This money may be a gift from a family member.
- Flexible qualification. FHA requirements have more flexibility than conventional loan programs. More flexibility = more opportunity to obtain financing.
- Less than perfect credit? No problem. FHA loans are more forgiving when it comes to credit. The approval is based on factors such as credit scores, credit history, employment history and income. At PRMG, we approved home buyers every day with credit scores as low as 550.
- Term options. Typically, FHA loans are fixed, but adjustable-rate loans are also an option.
Not everything is sunshine and daffodils – there is a downside. With an FHA loan, you will need to pay for upfront and monthly insurance premiums.
Our expert team is here to guide you through every step of the way. If you have more questions (or if you’re ready to get started) contact us. You may even qualify for one of our no money down options.