Like ice cream, mortgages come in many different flavors. The most common flavor is conventional loans, but not everyone may qualify. If this is you, or someone you know, an FHA loan may be the better option. With an FHA loan, you can put less money down, which is ideal for many first-time homebuyers. However, you may have to pay a higher interest rate and will need to pay a mortgage insurance premium.
Here are answers to the most common questions regarding FHA loans.
What is an FHA loan?
An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. The FHA loan is designed to help low-to-moderate-income families attain the dream of homeownership. In fact, FHA loans have been helping families since 1934.
What are the benefits of FHA loans?
Since FHA loans are insured, banks are more comfortable loaning money to homebuyers who may not qualify for conventional loans. Benefits to the borrower include:
- Low down payments
- Low closing costs
- May qualify with a lower credit score
What are the requirements to qualify for FHA loans?
As with any mortgage application, your lender will evaluate your financial and credit histories, income, current debt, and employment. You can only get a new FHA loan if the home you want to purchase will be your primary residence. The appraisal for the property will need to be conducted by an FHA-approved appraiser.
Will I have to purchase mortgage insurance?
Yes. Mortgage insurance is required on all government-insured loans.
What is the maximum amount you can get for an FHA loan?
This will depend on where you live as well as your ability to repay the loan. In 2022, the loan limit for a one-unit property in the United States was $420,680. This limit is higher in areas where it is more expensive to live (i.e., Hawaii).
The bottom line
The FHA loan is a path to homeownership for people who may not qualify for a conventional loan. We should also point out that USDA loans and VA loans are also available and are also government-insured loans. Give an Axia Mortgage Specialist a call today to discuss what options may be available to you.
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