If you’re currently renting, you are not investing your money wisely. A Federal Housing Administration (FHA) Loan makes it easy for you to get a return on your income by investing in an affordable home purchase. The FHA insures mortgages to help potential buyers like you purchase a home. FHA-insured loans have better rates and terms, which can make affording a home easier.
Traditional mortgages typically require a 20-percent down-payment. This can mean having to save between $21,000 to $127,000 or more, just to qualify for a loan. However, with an FHA mortgage, the down payment requirement is only between 3.5 and 10 percent/ So, you cansave tens of thousands of dollars in upfront fees.
The credit score requirement for FHA loan mortgages is also lower than with a traditional mortgage. Lenders prefer borrowers with good credit or a score of at least 620.
You need to meet the FHA loan requirements set by the government since it insures the mortgage.
The FHA loan requirements for buyers include the following:
- You must have a credit score of at least 580 and a down payment of at least 3.5 percent of the purchase price, or
- You must have a credit score of between 500 and 579 and a down payment of at least 10 percent of the purchase price
- You must have a debt-to-income ratio of no more than 43 percent
- The home you are purchasing will be your primary residence
- You must have proof of employment and steady income
If your new home needs repairs, you may apply for an FHA 203k loan – or Rehab Loan.
The government also has other loans for renovations that have better terms than conventional loans.