If you are a first-time home buyer or think you might not qualify for a home loan, an FHA loan may help. At Compass Mortgage in Aurora, we are here to help you understand what an FHA loan is and how it can move your home buying journey along. We are also here to help Aurora buyers apply for a mortgage loan when the time is right.
For buyers, an FHA home loan can help make home ownership a reality for low-to-moderate-income borrowers. FHA loans require a smaller down payment and are acceptable for lower credit scores than most other home loans. They are often popular with first-time home buyers, given how much less restrictive the conditions are.
FHA loans are provided by the Federal Housing Administration, which means they are issued by FHA-approved banks and lenders. Borrowers are required to purchase mortgage insurance, and premium payments are made to the FHA. FHA insurance ensures that lenders are protected if a home buyer defaults, which is why these loans can be issued to people who might not otherwise qualify.
There are several types of loans that come from the FHA, available to Aurora home buyers. The Basic Home Mortgage Loan 203(b) is very popular, with fixed or adjustable rates and eligibility for several types of homes. The 203(k) Rehab Mortgage rolls purchase and renovation into one loan, with purchase and refinancing options available.
Construction to Permanent Loans finance the construction of a home and the land on which it is built. A Title I Property Improvement Loan is used to purchase a manufactured home, or to repair an existing home. The Energy Efficient Mortgage is for energy-efficient upgrades during a home purchase or refinance, for new or existing homes.
Each of these loans comes with its own set of limitations. For example, a Basic Home Mortgage 203(b) cannot be used to buy a house that requires more than $5,000 in repairs.
To qualify for an FHA loan, you must have a minimum credit score of 500, though different lenders require different scores. The minimum down payment depends on your credit score, ranging from 10 percent to 3.5 percent. Your debt to income ratio must be 50 percent or less, again depending on credit score and other qualifications.
There is no salary requirement for an FHA loan, but you must have two established credit accounts, no delinquent federal debt or judgements, and no debt associated with past FHA mortgages.
The FHA loan limits are raised significantly for 2022, good news for Aurora, IL FHA loan seekers. In DuPage County, the single-home lending limit is $420,680 for 2022. In higher cost counties, the upper limit is $970,800. Each county has a loan limit stipulated by the FHA.
Lenders usually have their own stipulations, so it is worth researching what each lender requires and how your situation fits in to those qualifications. Just like a conventional home loan, FHA loans can be offered with different rates and terms.
FHA loans require property approvals to ensure the home or property meets FHA requirements. This is true no matter what type of home or property you are purchasing under the FHA. It is different from a home inspection, and is more like an appraisal, ensuring the home is worth the cost and that it is up to livability and safety standards.
FHA loans require that a home is safe, sound, and secure. This means the home is structurally sound, livable, and that the home is a secure investment that will retain its value during the life of the loan. There is a full set of appraisal guidelines available from the Department of Housing and Urban Development, but here are some highlights:
It is clear that a lot goes into acquiring an FHA loan, but also clear that it can be a very worthwhile avenue for Aurora buyers. Whether you are a first time homeowner exploring options, or your financial situation is such that a conventional loan will not work, this can be the solution. Let us help you on your way.
As far as Aurora, IL FHA loan lenders go, Compass Mortgage will do everything we can to find the right situation for you. We will help you understand and navigate any home loan situation. It is easy to apply for a mortgage online and our team is ready to offer personalized rates and top-tier service.