FHA Loans

FHA Loan Company 

For a many people across the country, homeownership is more of a dream and less likely to become a reality. Fortunately for those who have a less-than-perfect credit score, there are options available through the Federal Housing Administration, or FHA. An FHA loan is specifically designed to help those with lower credit scores afford a home loan. Lenders like them because they are insured through the FHA, are low interest, and give their clients an option for lower down payments.

If you are a first time home buyer, a low credit buyer, or have low to moderate income, an FHA loan can be your ticket to homeownership. If you meet the requirements, an approved lender can assist you in finding the perfect home to suit your needs. Compass Mortgage is proud to be one of those approved lenders.

What You Need to Apply for FHA Mortgage Loans

For an FHA loan, your credit score is the determining factor when it comes to the amount of down payment required for your home purchase. For example, a credit score over 580 will only require you to put down 3.5%. However, if your score is between 500 and 579, the percentage for down payment increases to 10%.

There are additional requirements that you must meet in order to qualify for FHA home loans. First, the home that you are purchasing must be your primary residence. Also, you need a stable income, no foreclosures within the previous three years, solid employment history, and a debt-to-income ratio of 50% or less.

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It is important to note that if you have previously filed for bankruptcy, this does not preclude you from applying for an FHA loan. If the bankruptcy happened over two years ago, and you can prove that you have improved your credit score, you can still receive a loan. FHA loan lenders want to know that you are managing your money wisely, so if they see your current situation is improving, they can do what they can to help you qualify.

Due to the more forgiving requirements, FHA loans are easier to obtain than other types of mortgage options available. There is also no maximum income limit, which means that even if you are a higher income buyer, you can benefit from an FHA loan.

In addition to the qualifications you must meet, your property and home must meet similar requirements. To begin with, it must be appraised by the FHA, which has to be done regardless of other appraisals and inspections that your lender may require of you. Your home must also be structurally sound and safe, so that it will retain its value through the duration of the loan.

Learning How FHA Loans Work

First and foremost, you will not receive your loan from the FHA itself. Instead, your loan will be given to you by a lender that is working with the FHA. This makes it very similar to any other mortgage that you might obtain, with the exception that it is insured by the FHA. You would make your payments to the FHA, either paying off your mortgage insurance premium as a lump sum once the loan has closed, or as an annual premium.

This means that you are subject to requirements from both the FHA, and from the FHA loan lender that you choose to work with. Just like with any other major transaction you make; it is imperative that you learn the terms of your loan before taking it.

Your loan will also slightly differ depending on the area that you live. So, make sure that you talk to a home mortgage lender in the specific area that you intend on buying, as their requirements and terms could be different than those in another county or state.

An FHA Loan Can Be Your Ticket to Homeownership

If you need to find a loan that allows you to make a lower down payment, an FHA loan is for you. Furthermore, FHA loans also allow for gift funds for the down payment and the closing cost, something other loan programs do not always allow for. You can also obtain an FHA loan if you have no credit score whatsoever, thanks to the Department of Housing and Urban Development.

Due to a variety of circumstances, there are a number of people across the country that feel like homeownership is nothing more than a pipe dream. However, through an FHA loan, that dream can become reality a lot quicker than you may think. If you are curious about purchasing a home through an FHA loan, or would like to explore other mortgage options, Compass Mortgage can help. Contact us today.

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