A Flexible Path to Homeownership
Lower down payments and less stringent qualification requirements are just some of the benefits of a Federal Housing Administration (FHA) loan. Some of the perks include:
- Down payment as low as 3.5%
- Lower credit score eligibility
- Fixed-rate options from 30, 25, 20 and 15 years
Whatever your budget and financial goals, I’m here to help you feel confident in your home buying decision. I'll help you find the perfect mortgage for you and your budget, while guiding you through a simple and streamlined home loan process.
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What is an FHA loan?
An FHA loan is backed by the Federal Housing Administration (FHA) and was created to help low- to moderate-income borrowers finance their home purchase. Because of the lower down payment requirement, FHA mortgages are popular options for first-time homebuyers eager to make a move. An FHA home loan also offers benefits like lower credit requirements and low closing costs.
FHA vs. Conventional Loans
FHA loans are only offered through FHA-approved lenders, like PrimeLending. Unlike a conventional loan, FHA home loans have a smaller down payment requirement. But, with the lower down payment requirements comes mortgage insurance premiums (MIPs). All FHA loans require MIP which is typically charged as an upfront payment and minimizes the lender’s risk if a borrower defaults on their mortgage. Even with MIP, FHA mortgages are still a good option for borrowers who may not be able to make a 20% down payment.
Conventional loans, on the other hand, offer less flexibility in their loan requirements because they are not guaranteed or backed by any government agency. This means conventional home loans have higher credit and down payment requirements. If a borrower makes a down payment under 20% on their conventional loan, they will have to pay private mortgage insurance (PMI). Unlike MIP, which is required on all FHA loans, PMI is only temporarily required if the borrower puts down less than 20% and it can be removed once their loan balance is under 80% of the home’s value at the time of purchase.
How to apply for an FHA Loan
To apply for an FHA loan, you will go through the same mortgage process as a traditional home loan application. Some of the financial documentation you will need to provide includes:
- Two most recent years’ worth of verifiable income (W-2s)
- Two most recent years’ tax returns
- Other verifiable income (child support, alimony, Social Security, etc.)
Don’t have W-2’s? Do you use peer-to-peer apps to get paid or pay your rent? Let’s talk about how Loan Lift could help you get qualified. Our Loan Lift program captures all your financial activity—including rent payments, shared expenses and additional cashflow histories—that may not always be captured as part of a typical financial history. Give me a call and I can walk you through how Loan Lift works.
How to qualify for an FHA Loan
In addition to providing the documents mentioned above, you—and the property—will need to meet FHA eligibility requirements to qualify for an FHA mortgage. Some requirements to qualify for an FHA loan include, but may not be limited to:
- FHA loan must be used to purchase a primary residence
- The house must meet FHA guidelines and minimum property standards
- The home must be owner occupied
Types Of FHA Loans
Both fixed-rate and adjustable-rate options are available for FHA loans—which one fits you best will depend on your situation. You can also get an FHA refinance or take on renovation projects with an FHA 203K loan.
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- 30-year fixed-rate FHA
- FHA 25-year fixed-rate FHA
- FHA 20-year fixed-rate FHA
- FHA 15-year fixed-rate FHA
All of these options offer the same rate stability. If you plan to move in the future, a shorter loan term may be the route to go, but if you want to make this home your forever home, an FHA loan with a longer term could be a viable option that also offers a lower monthly payment.
If you know you are going to move, or want the flexibility to do so, an adjustable-rate FHA home loan could be the mortgage for you. Like a traditional adjustable-rate mortgage (ARM), an adjustable FHA mortgage allows borrowers to pay a lower introductory interest rate for the first few years of their loan. After this fixed initial period, the rate will adjust at set intervals based on the rates at the time. When the rate changes, your monthly payments will increase if rates go up and decrease if rates fall. PrimeLending offers the 5-year hybrid ARM.
Already have an FHA loan but want different loan terms? You may be able to refinance your FHA loan! You can also refinance other loans into an FHA mortgage, provided you meet the FHA eligibility requirements. FHA refi options include:
- Fixed-rate FHA refinance
- Adjustable-rate FHA refinance
- FHA cash-out refinance*
Have your heart set on a fixer upper? Or do you want to make some upgrades to your current home? An FHA 203K renovation loan could help you bring your home renovation dreams to life by financing the purchase and renovation costs of a home. Available in Full/Standard and Limited options, an FHA 203K renovation loan offers lower down payment requirements and lower refinancing interest rates.
Typically used to modernize older properties in need of major renovations like structural repairs, common projects completed with FHA 203K Full/Standard financing can include:
- Adding a room or creating an open concept layout
- Replacing the foundation, roof, or plumbing
- Energy efficient upgrades Improving home functionality and/or accessibility
An FHA 203K Limited renovation loan is a solution for smaller projects or cosmetic upgrades that cost $35,000 or less. Minor, non-structural renovations that an FHA 203K Limited loan can finance may include:
- Update existing HVAC, plumbing or electrical systems
- Remodel or finish a basement that does not require structural work
- Installing energy-efficient windows, doors, insulation, and/or appliances