FHA loan is a type of mortgage loan backed by the Federal Housing Administration. This Federal Housing Administration makes it possible for borrowers with lower credit score of 580 to be able to purchase a house. It is the common and easy form of mortgage loans first-time buyers go in for.
These mortgage loans are provided by FHA-approved lenders and not the Federal Housing Administration. They rather as a guarantor to your loan as it is required for you to buy a mortgage insurance.
How FHA loan works
FHA loan allows a down payments as low as 3.5% with a 580 FICO. Also, borrowers with credit score below 580 FICO are entitled to this loan provided they can make a 10% down payment. As we indicated above, this loan is insured by the FHA which means that when a loan goes into default, the FHA will pay for the credit.
You can aso get financial help on your downpayment from FHA. You don’t necessarily need a good credit score to qualify for this loan.
Benefits of FHA loans
- They require lower credit score and downpayment as compared to conventional loans.
- Low income earners can still qualify for FHA loans.
- Borrowers with credit score below 580, can still qualify for this loan.
- Your loan is insured by FHA.
FHA mortgage insurance
The Federal Housing Administration (FHA) provide insurance for FHA loans. The FHA requirements and qualification factors are easier and simple due to the lower minimum down payment and credit score.
Types of FHA loan
The Federal Housing Administration provides different form of FHA loans. They include;
- Home Equity Conversion Mortgage (HECM) – With the form of mortgage loan, seniors who are 62 and older get to exchange their home equity for cash.
- FHA 230(k) Improvement Loan- This is a mortgage loan that allows borrowers to get a loan for home purchase and renovation.
- FHA Energy Efficient Mortgage – Borrowers tend to use this form of loan to improve upon their energy efficiency.
- Section 245(a) Loan – Borrowers with low income but have an expectation that it will be can get a loan to purchase a house with the help of a Growing Equity Mortgage.
Requirements for an FHA loans
Qualifying for this form of mortgage loan is simple and easy. Check out the following requirements;
- Minimum credit score of 580 FICO and 3.5 downpayment.
- Below 580 credit score and 10% downpayment.
- Debt-to-income ratio
- Income and value of property
- Employment history
Best FHA loans
- Prime Lending
- PNC Bank
- New American Funding
- Carrington Mortgage Services
- Freedom Mortgage
- Quicken Loans
- Wells Fargo
- SunTrust Bank
- Flagstar Bank
- Bank of America
- Guaranteed Rate
- Caliber Home Loans
- Veteran United Home Loans
- CMG Financial
- Guild Mortgage