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About FHA Loans
FHA Loan Eligibility
An FHA loan is a federally insured loan made by the Federal Housing Administration, which has been insuring mortgages since 1934. FHA loans are very good options for many borrowers.
Summary of FHA loans
- Low down payment. FHA loans usually require a minimum of 3.5 percent down payment. This down payment can also be gifted to the borrower, which makes it much easier for first-time home buyers to purchase their first home.
- Easier qualifying. Those with less-than-perfect credit are more easily approved for a loan through FHA programs because the federal government insures them. You may qualify for an FHA loan even though you have had financial problems.
- Lower overall costs. An FHA loan can have a better interest rate, which cuts down on the overall cost of the loan.
- Avoiding foreclosure. The Federal Housing Administration provides programs to help avoid foreclosure in case of financial difficulties.
- FHA allows sellers to contribute to the buyer's closings costs - up to 3% of the purchase price - which is another feature of these loans that is especially helpful for first-time buyers.
- FHA limits for Riverside and San Bernardino Counties - $500,000 loan limit.
FHA Eligibility requirements
- You must have a valid Social Security Number, be a legal resident of the United States and be of legal age to obtain a mortgage in your state.
- The lender verifies whether you can qualify for the mortgage by checking income, assets, debt load and credit history.
- You must be able to qualify for the loan.
- Typically, the only income limitation is to have enough income to afford the mortgage in addition to other debt payments.
- Although there is not a minimum credit score required to qualify, your score is still examined to help determine the interest rate. Your FICO scores can be lower than those required for a conventional loan.
Good candidates for FHA Loans
- If you are a first-time home buyer, an FHA loan is a good option. It can help you get a better rate than a conventional mortgage and you do not have to have as large of a down payment.
- Those who can only afford a small down payment or those who were given the down payment as a gift often find an FHA loan to be a good choice. It only requires 3.5 percent down and the down payment can be a gift from a family member or other source.
- If you have less-than-perfect credit, an FHA loan might be your best option. Because the Federal Housing Administration insures the loan, lenders can provide a loan to a borrower with poor credit without needing to charge exorbitant interest rates.
If you meet the eligibility requirements and seem to be a good candidate for an FHA loan, you can contact an FHA-approved lender to see if you can qualify for a mortgage. However, it is always important to compare when shopping for a mortgage. Investigate conventional loans, too, to see where you can get the best deal.
Note: If you have had a bankruptcy. You may be able obtain an FHA loan two to three years from the date of your bankruptcy discharge, as long as you've maintained good credit since your debts were discharged.
If you have had a foreclosure. If you keep your credit in excellent shape since a foreclosure, an FHA loan may be available to you two to three years from the final date of your foreclosure.
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