What Do You Need To Get Approved For An FHA Loan?

The greater majority of us can’t afford to purchase a home without having a loan of some sort to back it up. Perhaps it was a friend or an article you skimmed through online or maybe it was the neighbor’s third cousin you met at a party who brought the term “FHA Mortgage” to your attention. But what made you sit up and listen actually was knowing that they were popular not just with first-time homebuyers but other potential buyers too who enjoy the less rigorous requirements.

Nevertheless, to say that this isn’t the complete even for basic information on FHA loans would be to state an obvious. And if you’re planning to buy a home via FHA loan, then we’d better get started.

What Does FHA Stand For?

Even before you begin wondering how taking out a government-insured mortgage can aid in your overall budget, you need a proper introduction. You’d, in fact, be surprised to know that the FHA loan isn’t even one in the true sense seeing that it refers to a sort of government insurance against the risk potential borrowers pose to go default on the loan.

Yes, the gratitude you were so full of for the lender wouldn’t probably even have considered your application if it weren’t for the federal government assuring them that they’d pay the remainder in case you default. The lower risk at the lenders’ end means you’d have an equally low interest to pay for, thereby allowing you to save more for miscellaneous expenses.

Do You Qualify?

The loan provides better for individuals preferring single-family homes although some condos and multi-family homes make the list too. With as little as 3.5% down payment, the loan can be applied for as well in case you need the cash to fix and repair an older home. It’s okay if you have:

·         A less than stellar credit; a score of 580 and above would secure you the 3.5% down payment but it doesn’t matter if it falls between 500 and 579 as long as you’re able to put down a minimum of 10%. A score that’s less than 500 is usually not allowed except in specific conditions

·         You aren’t restricted to your personal savings to make the down payment; grants from local or state government program and sources like cash gifts from family is accepted too

·         The lender has to be one of the FHA-approved ones; no two lenders will have the same services, costs, and underwriting standards so do shop. Also, they have their own set of principles (e.g. a FICO score of 640 or above) in addition to those provided by FHA for your loan application to be approved

·         The builders, sellers, or even lenders can offer to pay some of the closing costs for the borrower; note, however, that lenders who do so usually charge more in terms of interest so you may want to compare estimates first before settling for an option

·         All FHA loan products necessitate a 2-part mortgage insurance including an upfront premium and the annual premium

·         There are no income limit; just show you can repay it

·         There are limits for the area the house ought to be in though; areas that have high housing costs will have high limits

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