WHAT IS AN FHA LOAN?

FHA loans are insured by the Federal Housing Administration and can be a great option for people who would normally find it difficult to qualify for a mortgage due to their income level, credit history, or their ability to put down a sufficient amount of down payment. For borrowers with a credit score of 580 or higher, these loans allow a down payment of just 3.5% of the total cost of the home. For those with a credit score between 500 and 579, a 10% down payment is required.

EXPANDING HOME OWNERSHIP THROUGH FHA LOANS

Whether you need a reduced down payment, or have not-so-perfect credit, an FHA loan remains one of the easiest loans to obtain today, benefiting first-time home buyers, as well as those who plan to make substantial repairs and need additional cash set aside for those improvements.

But there are qualifying factors for both the borrower and the home you choose. FHA loans require that a FHA-approved appraiser conduct an appraisal and it must meet certain standards of condition.

REDUCED DOWN PAYMENT AND FLEXIBLE FUNDS SOURCING

 

While a conventional loan typically requires a down payment of 20 percent, the down payment on an FHA loan can be as low as 3.5 percent.

Furthermore, the source of the funds used for a down payment can be (in part or whole) a gift from a family member, as well as funds obtained through a grant from a state or local home buyer’s assistance program.

Closing Costs

Closing costs include an appraisal, a credit report, title expenses, and more, and can often be covered by the seller, or the lender themselves. A home seller may, for example, agree to cover all or part of the closing costs as part of the negotiated price. Closing costs can also be included in the loan, although a higher interest rate may apply.

MORTGAGE INSURANCE

Mortgage Insurance for an FHA loan is a two-part process: an initial premium (1.75 percent of the base loan amount) paid upfront, and an annual premium broken into monthly installments, included as part of the total monthly loan payment. The upfront premium is typically included in the loan. The total amount of the loan, as well as the years financed will determine the annual/monthly premium installment. Borrowers who make a larger down payment can typically reduce mortgage insurance fees, as they have personally assumed more of the risk with a larger down payment.

The Kolesar Team has been successfully securing FHA financing for our clients for over two decades.

Contact The Kolesar Team today and find out if you qualify for a FHA loan! A consultation with a member of our team can help you quickly identify if you meet the loan requirements for an FHA loan.

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