FHA Home Loans – Answers to your Most Frequently Asked Questions

Published On: November 22, 2021|Categories: Buyers, Buying Tips, FHA Loans, First Time Home Buyers, Home Buyers|Tags: FAQs, FHA, FHA Home Loan Program, FHA Home Loans, First Time Home Buyer, Frequently Asked Questions|

If you are a first time home buyer then you may be eligible for an FHA loan. An FHA loan offers a wide range of benefits including lower down payment and more options to keep your interest rate low. Here are some frequently asked questions that first time homebuyers ask about FHA loans.

What is an FHA Loan?

FHA home loans are loans that are backed by the US government. The federal housing administration and most states offer this loan to first time homebuyers. This type of loan insurance lenders against potential default which means if you don’t make your payments your lender will not lose out and that can mean you will get a better interest rate and long-term than you would with a conventional loan.

How much would my Down Payment be with a FHA Loan?

Typically your down payment will be 3.5% of the homes purchase price, however that will be dependent on your credit score. Most lenders require you have a credit score of 620 to 640 in order to qualify for an FHA loan but some will allow you to get an FHA loan with a score of 580 or above. Check with your lender to see what their requirements are.

Is a FHA Loan available to me if this is not my first home purchase?

To qualify as a “first time home buyer” you must have not owned a home in the past three years. This means that if you have purchased a home in the past and sold it and have rented for three years or more since then, then you may qualify for an FHA loan. There are other situations that may qualify you for an FHA loan as well including being a displaced homemaker or a single parent. Make sure you discuss your options with your lender to see if you qualify.

Why should I consider using an FHA Home loan?

Besides being a first time home buyer there are other benefits to getting an FHA home loan. You may want to consider an FHA loan if:

You do not have a lot of cash saved for your down-payment.
You have a lower credit score & do not qualify for a conventional home loan
Other types of loans have a higher interest rate for your situation
You want to avoid large fees

Do I need PMI (Private Mortgage Insurance)?

Most lenders will require you to get private mortgage insurance if you don’t put down 20% or more of your homes purchase price. With most loan types once you reach 20% equity in your home you can stop paying PMI but with FHA home loans you will have to pay private mortgage insurance for the duration of the loan. This could be a drawback for some as PMI can be expensive. Discuss this with your lender before making any decisions.

How much can I get approved for with an FHA Loan?

FHA home loans do you have loan limits and are based on location. Your lender can tell you what the loan limit is for your area. Loan limits change from day to day so if you think you may be close to your areas limits then make sure you check it often.

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