Most people think in order to buy a home, they have to put a substantial amount of money down. Actually, that is not always the case. FHA loans are actually one of the easiest mortgage loans to get approved on and require a lot less down. Also, the mortgage rate of an FHA loan is considerably lower than a conventional mortgage rate.
So, what is an FHA loan exactly? It is a mortgage insured by a government agency known as the Federal Housing Administration. Through an FHA loan, lenders are insured in case a buyer fails to repay the loan. The Federal Housing Administration will reimburse the lender. Because of this “insurance” lenders are more apt to to write loans when they otherwise would not.
Credit scores of 580 and above qualify with only 3.5% down. This down payment can be gifted as well. As long as the gift is from a relative, a friend who has invested interest, your employer or a charity.
As of 2018, the loan limits were increased from 275,665 to 294,515 for low cost areas like Lubbock, TX. These loans are perfect for first time home buyers, buyers with low-income, or buyers with lower credit scores. FHA loans are also good for a buyer with a high debt-to-income ratio.
If you are considering buying a home and you are unsure about which loan is right for you, please feel free to connect with me via email or phone.