Benefits of aFHA LOAN
- Low Down Payment and Credit Score Requirements, less strict
- Mortgage Interest Rates are low and affordable
- Fixed Rate with no prepayment penalty
- Mortgage Insurance is set doesn’t depend on your Credit Score like a Conventional Mortgage
- Mortgage Interest can be Tax Deductible, ask your CPA or Tax Planner for details
- Sellers can pay up to 6% of Closing Cost which means less money out of pocket for the borrower
- Much more flexible to obtain than say a Conventional Home Loan due to Credit Score Requirements
What are fha loan requirements?
Here are the requirements:
- Down Payment is 3.5% although Down Payment Assistance or DPA may be available depending on the area. The down payment can also be gifted by a family member
- Credit Score down to a 620, middle score of the three or lower of the two
- Mortgage Insurance or MI is required .85% is the factor for 3.5% down, .80% with 10% down, also a funding fee of 1.75% of the loan amount is added to loan but paid to FHA
- Debt to Income Ratio is 43% unless you receive a Desktop Originator or DO Approval which is automated, they can go as high as 56%, but the loan still has to be approved by lender’s underwriter
- Income must be steady and provable, two year work history is required with no gaps longer than 6 months unless your in school at a university
- Two months bank statements to show down payment and additional reserves may be required, large deposits have to be sourced, NSF’s must be explained
- Only Primary Residence, no Second Homes or Investment
Borrowers must have valid identification and lawful residency i.e. Driver’s License, Social Security number, Work Visa
How does an FHA Loan work?
The FHA Loan is a home loan program which provides borrowers with an opportunity to own a home with only 3.5% down. Also, some lenders will finance with a Credit Score as low as 620.
What is an FH Loan?
An FHA Loan is a mortgage loan program which is government insured by the Federal Housing Administration. The loans are issued and underwritten by a FHA Approved Lender.
How hard is it to get an FHA home loan?
It depends on the quality of your financial house, credit score, income and assets. This will be the difference on whether it’s hard or easy.
So for example if your Credit Score is 660, you’ve been on the job for 2 years as a wage earner, you have enough income to support the housing payment/debts, then you have the 3.5% in the bank or say a family member who wants to gift it to you then yes the process can be smooth.
Are FHA loans only for first-time buyers?
No, FHA is a great program whether you are a first time home buyer or not
Why are FHA loans less costly than a Conventional mortgage loan?
I’m not going to say FHA is less costly, lots of factors go into this, but it can be. What I will say is usually on Conventional Loans borrowers put 5% down although 3% is minimum but certain conditions have to be met. Also, the underwriting guidelines are more flexible for FHA due to Credit and Down Payment. Finally on FHA the sellers can pay up to 6% towards borrower’s closing cost which is usually more than Conventional.
Baton Rouge LA-Mortgage
The Federal Housing Administration (FHA) was established in 1934 with the primary goal of improving the US housing market. To achieve this goal, the FHA insures home loans that are offered by approved lenders. FHA loan programs make it possible for homebuyers to receive great rates and qualify with less than ideal credit while lenders are protected from borrower default. Family First Mortgage offers the most competitive rates on FHA loans throughout Lafayette, Baton Rouge, Lake Charles, and the surrounding Louisiana communities.
FHA loans are a popular choice among first-time homebuyers throughout Louisiana given their low down payment and relaxed credit requirements. A borrower may be able to qualify for an FHA loan with a credit score of 600 and a down payment of only 3.5%. Family members can even offer the down payment as a gift if the borrower does not have the cash on hand. Loan limits vary by county and can range from $271,000 up to $636,500 in high-cost areas.
Louisiana FHA Loan Requirements
- Credit Score – A minimum credit score of 620.
- Debt-to-Income Requirements – A debt-to-income (DTI) ratio of 43% or less. A DTI ratio of up to 50% may be approved in special cases.
- Down Payment – 3.5% of the purchase price if credit requirements are met.
- Property Requirements – All properties must meet certain safety, security, and soundness (structural integrity) requirements.
The many benefits of FHA loan programs are made possible by mortgage insurance. Two premiums are paid with each FHA loan. One is an up-front premium of 1.75% of the purchase price. This premium is automatically added to your total mortgage amount at closing. The second premium is paid monthly as part of your mortgage payment and will be between .45% and 1.05% of your annual mortgage balance. The rate varies from buyer to buyer depending on factors such as total loan amount, length of the mortgage, and loan-to-value (LTV) ratio.
Cash-out refinance and streamline refinance programs are also available to current FHA loan holders. To help protect borrowers, streamline refinancing is only available if the borrower will save money through the refinance. Borrowers who want to purchase a home while making renovations at the same time will find the FHA 203k loan to be a valuable option as well. This unique type of home loan allows a borrower to combine the purchase of a home and the cost of renovations and repairs into a single mortgage.
Whether you are looking to purchase your very first home in Louisiana, or are a current homeowner looking to refinance an existing FHA loan, at Family First Mortgage, we offer great rates and terms on all FHA loans. Contact us today for more information on FHA loans throughout Lafayette, Baton Rouge, and Lake Charles, or to begin the pre-qualification process!