What is an FHA Loan
An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA). It is designed to help homebuyers with lower credit scores or smaller down payments to purchase a home.
FHA loans are issued by private lenders, such as banks and credit unions, but they are backed by the FHA. This means that if the borrower defaults on the loan, the FHA will pay the lender the remaining balance.
The benefits of an FHA loan include:
Lower credit score requirements: Borrowers with a credit score of 580 or higher may qualify for an FHA loan with a down payment as low as 3.5%.
Lower down payment requirements: The down payment requirement for an FHA loan can be as low as 3.5% of the purchase price, which is much lower than the traditional 20% down payment required for conventional loans.
More flexible income requirements: FHA loans have more flexible income requirements compared to conventional loans. Borrowers may be able to use non-salary income sources to qualify for the loan.
Higher debt-to-income ratio allowed: FHA loans allow a higher debt-to-income ratio (DTI) than conventional loans, which means borrowers can have more debt and still qualify for the loan.
It's important to note that FHA loans also require mortgage insurance premiums (MIP), which are paid by the borrower to protect the lender in case of default. The MIP can add to the overall cost of the loan.
For more information, contact Kevin Tinsley at All Tech Mortgage Inc. 253-472-1500 (evenings, weekends. text OK)
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.