Getting an FHA loan makes it possible for many South Florida residents to find the home of their dreams. This loan was designed specifically for anyone with low to moderate incomes.
While you may not qualify for a conventional loan, an FHA loan could be the answer you are looking for.
We’ll explain everything you need to know about an FHA loan in this article.
If you think after reading this that an FHA loan might be in your best interest, contact us to set up an appointment. Ace Mortgage Loan Corp has been serving Broward County residents since 1996. We have helped people from Parkland to Davie find the right mortgage to fit their budget.
What is an FHA loan?
The Federal Housing Administration (FHA) insures mortgage loans to lenders based on certain criteria.
This government-backed mortgage guarantees compensation to the lender if you default on your payments. You apply for this loan through a regular mortgage lender that provides FHA loan approvals.
The FHA loan allows people with less-than-ideal finances to still be able to own a home.
If you haven’t been able to save enough for a down payment with a traditional mortgage, an FHA loan can help.
It is also ideal for people with less than perfect credit scores.
How to know if you qualify for an FHA loan.
Getting one of these government-approved loans can be easier than you think.
The requirements are more lenient than a traditional mortgage loan. Down payments are lower but the amount depends on your credit score.
There are also other requirements that need to be met.
Here is a list of the basics of getting an FHA loan approved.
- If your credit score is at least 580, you will need to pay 3.5% for the down payment.
- If you have a credit score between 500 – 579, your down payment will be 10%.
- A debt-to-income ratio of 43% or lower is needed. To determine this, take the total amount of your monthly debts and divide it by your monthly gross income.
- You will be required to have mortgage insurance.
- Borrowing limits depend on where you live and the kind of home you want to purchase. You can check your allowable limit by clicking here.
- You can get an FHA loan for a single-family home or a multi-family home that houses no more than four families. Condos and manufactured homes are allowed as well.
- There are property standards required as well to get a loan approved. There can be no major structural issues, but some basic fixer-upper issues are fine. The property cannot be on a high-traffic road or near a hazardous waste site.
- The home must be your primary residence.
- Proof of employment with a steady income is also required.
Benefits from getting an FHA loan.
There are many pros and cons in regard to getting an FHA loan. Let’s start with the benefits.
- Lower down payments. Your down payment is dependent on your credit score.
- Approval with a credit score as low as 500. You may also still qualify with a recent bankruptcy or foreclosure.
- Unlike most conventional loans, an FHA loan allows for others to contribute money towards your deposit. Family members, employers, close friends, and charitable organizations can assist you.
- Your debt-to-income ratio requirement is lower. Your DTI can be as high as 43% which is greater than the traditional mortgage loan standard.
- There are no income limits for approval. High-income earners who have problems with their credit can qualify.
- Your mortgage insurance premiums are lower than with a traditional mortgage. No matter what your credit score is, you pay the same premium.
Disadvantages of an FHA loan.
Below are the most common disadvantages associated with getting an FHA loan.
- Mortgage insurance is more expensive. While the premiums are lower, the total costs are higher. This is not required if you can afford to make a down payment of 20%.
- Lower mortgage loan limits. FHA loan limits vary by region and type of housing. They are typically about 30% lower than a conventional mortgage loan.
- The home has to be your primary residence.
- The FHA creates housing standards that limit your ability to buy a fixer-upper. The property must meet certain safety and health standards.
Is an FHA loan right for you and your family?
If you are a new homebuyer with a less than perfect credit history, an FHA loan is the way to go.
If you don’t have a lot of money to put down, you might also want to consider this option.
Consider the facts and weigh the positive and negative effects of getting a government-backed loan before deciding.
We Can Help
Our team of experts can help you navigate through the loan process to find the right lender to fit your needs. We have helped countless South Florida customers find the home of their dreams. Give Ace Mortgage Loan Corp. a call today at (954) 866-7302.