What is an FHA loan?
FHA loans are issued only by qualified lenders and insured by the FHA (Federal Housing Administration), and they are also some of the most common home loans used in the United States today. Though many people think of FHA loans as loans geared toward first-time homebuyers, they are actually available to anyone and were designed specifically for borrowers with low-to-moderate income who are unable to make a sizeable down payment on a home. FHA loans are highly sought after because they only require a minimum of 3.5 percent down, and they don’t require as high credit scores for approval as most other loans.
With an FHA loan, your down payment is dependent on your credit score.
In the vast majority of cases, in order to qualify for a conventional loan, your credit score would have to be at least 620. The beauty of FHA loans is that they allow people with credit scores as low as 500 to qualify for a home loan. However, it’s important to keep in mind that your credit score will play a role in how big of a down payment you’ll need to make. If your credit score is 580 or higher, you’ll be required to make a down payment of at least 3.5 percent, but if it’s between 500 and 579, you’ll be required to make a down payment of at least 10 percent. Worried about coming up with a down payment? Don’t forget to ask your loan officer about down payment assistance!
Is an FHA loan right for you?
For borrowers who may not have the highest credit scores or the most money saved for a down payment, an FHA loan can be a great option for getting into your dream home. FHA loans offer competitive interest rates, fixed or adjustable rate terms and easy refinancing, and they allow gifted down payments and accept grants and down payment assistance programs. There are so many reasons to choose an FHA loan!
Think an FHA loan might be the right choice for your needs? Contact our loan officer, Traci Gratzek, from NOVA® Home Loans today!