Last Updated on July 1, 2024 by admin
The Federal Housing Administration (FHA) loan program is designed for low-to-moderate-income borrowers which makes it possible to buy a home by contributing lower minimum down payment and lower credit scores up to 3.5 percent of the sales price of the home toward closing costs.
The mortgage is insured by the Federal Housing Administration (FHA) and issued by an FHA-approved lender.Home buyer can borrow up to 96.5% of the value of a home with an FHA loan with down payment of 3.5% compared to any conventional loans.
You can get the FHA Loan from an approved lender, like a bank or another financial institution. For further clarification we state different kinds of Federal Housing Administration loans and how to qualify.
Read: What is considered as good and Bad credit score
How to qualify for Federal Housing Administration loan
1.Have good source of income
As a home buyer your steady source of income will go a long way for approval because most lenders will verify your income to ensure you have capability to pay as when due. Also your tax return is very crucial to get an FHA loan, so ensure you have your tax return and steady income before applying fha.
2. Get your 3.5% down payment ready.
To get an FHA loan, you have to contribute your 3.5% payment as part of the requirement. though it’s advice-able to save up to 6% due to an upfront mortgage insurance premium equal to 1.75% of the home’s value.
3.Check your credit report
The most important thing you need to know is to check your credit report and credit score whether it reflect to qualify.though FHA guidelines have laid out that borrowers can qualify with a credit score at least 500.also lender make there own rules about what they’ll accept, once you have a credit score,you can now check you mistakes and omissions.mistakes can be your bad debt collection ,you doesn’t require your credit account you’ve paid.
4.Don’t exceed FHA loan limits.
how much you can borrow with an FHA loan vary by state and county, ensure you don;t go beyond your limit
5.Apply for the correct type of FHA loan
There are different type of FHA loans, so ensure you go for the right package to enable you get approval
6. Make a bigger down payment
The bigger down payments you can pay for the mortgages is below 3.5% but you need to put down just A little bit more , that will improve your interest rate. A larger down payment will lower your LTV and they will confirm that you’re a good borrower .This may let you have the best deal with a FHA loan.
7. put off a credit card
Most lenders can also consider your debt to income ratio with the amount you owe,divided by your amount you earned monthly. You can get a credit card that still has a balance due? Which means you will work to pay it off. So, by working to pay it off you will have two positive results : you will Lower your debt to income ratio and it will improve your credit score.these steps may let you have the best deal with FHA loan
8. Begin the application process
Once you are sure that you are qualify for an FHA loan, put up your application forward and provide the required document to support your approval
9.Don’t stop after the first lender
All that you need from lenders is to say “yes” and many people will stop right there .But it’s grateful to continue shopping for better deals.if you think about it? You will know you can qualify and you can get approval for your back pocket. However, it is important for you to find a lender that will offer you a better FHA mortgage rate and that will reduce the interest you pay over the world of loan. These steps also may let you have a better deal with FHA loans.
Read: what is credit card and different Types of credit card
10. Explore state first home buyer programs
You need to explore first home buyer assistance programs offered by your state’s housing authority.some of these non profit agencies will mingle FHA mortgages with the down payment and closing cost assistance. This also may let you have the best desk on FHA loan.
Self-employed
If you’re self-employed, you need two years of successful self-employment history; this can be documented by tax returns and a current year-to-date balance sheet and profit and loss statement
Types of FHA Loans
1. Home Equity Conversion Mortgage (HECM)
This kind of loan is designed for seniors aged 62 and older to enable them convert the equity in their homes to cash while retaining title to the home.
2. FHA 203(k) Improvement Loan
This FHA loan package enables the borrower to get both home purchases and home improvements if you don’t have a lot of cash on hand after making a down payment.
3. Section 245(a) Loan
The package is designed for borrowers who expect their incomes to increase. Under the Section 245(a) program.
4. FHA Energy Efficient Mortgage
The loan is designed for upgrades that can lower your utility bills by making more income available for mortgage payments.
