Wayzata, MN
FHA Loans
FHA Loan Company in Wayzata
Homeownership is a life goal for most US citizens. The problem is that it is completely out of reach for many people. This is due to the significant down payments that traditional mortgage lenders require. The typical amount for a down payment is 20%. When you consider that the average house price in the US is around $400,000, suddenly homeownership seems like a distant dream.
Homeownership should be achievable for anyone that earns an income, and thankfully this has been made possible. Now middle to low-income earners can buy a home with only a minimum down payment.
The FHA (Federal Housing Administration) loan enables would-be buyers in Wayzata to purchase a home with a down payment of as little as 3.5%. On a $400,000 home, that would mean only $14,000 is required to purchase the home (plus fees).
With that said, a Wayzata, MN FHA home loan is not suitable for everyone. So, let Compass Mortgage show you how FHA loans work and who they are best suited for.
What Are FHA Loans and How Do They Work?
Wayzata, MN FHA home loans are available in the following circumstances:
- Individuals can be accepted for an FHA loan with a credit score as low as 500
- The down payment can be as low as 3.5%
Your credit score will determine the down payment. If your score is between 500 – 579, you can still be accepted; however, the down payment required will be at least 10%.
For scores of 580 and upwards, you could be approved for the lowest rate of 3.5%. It is worth noting that traditional lenders require a credit score of 620+.
Wayzata FHA home loans are easy to apply for. First, you must go through an approved lender such as Compass Mortgage. You must then also pay a monthly premium to the FHA to provide the guarantee. Essentially this means that the FHA will pay any claims to your lender should you default on the mortgage payments.
The Different Types of FHA Loans in Wayzata
Several different types of FHA loans are available. Your lender will advise on which one is best for your circumstances:
- Traditional Mortgage: A loan to finance the cost of your primary residence
- Home Equity Conversion Mortgage: A reverse mortgage program for seniors 62+. The loan converts the equity in the property, but the title on the property remains intact.
- FHA 203(k) Improvement Loan: This type of loan includes the cost of the property as well as any required home improvement and renovation costs.
- FHA Energy Efficient Mortgage: A mortgage that includes the cost of the property itself plus the cost of upgrading to energy-efficient systems that result in reduced utility bills.
- Section 245(a): Initial low monthly repayments that incrementally increase over time. The payoff for this option is a shorter loan term and is ideal for anyone who knows or expects their income to increase.
Are Wayzata, MN FHA Mortgage Loans Right for You?
There are some conditions that you must adhere to if you decide to take out an FHA loan. The first is that the loan must be used to purchase your primary residence. The second is that you must move in within 60 days of completing and receiving the keys. Finally, you must live in the property for at least a year. An FHA loan cannot be used for:
- Purchasing a second residence
- Purchasing a vacation home
- Purchasing property for investment purposes.
However, you can acquire a rental income from a property you have purchased with an FHA loan. There are two ways to do this:
- Move out of the property after living in it for the required year and renting it out.
- Purchase a multifamily residence. You must live in one of the units, but the rest can be rented out how you like.
How to Apply for an FHA Loan in Wayzata
Compass Mortgage is one of the approved Wayzata, MN FHA loan lenders. Our high level of experience and expertise will help you find the perfect mortgage for your needs.
There are five main steps to the FHA mortgage loan process:
- Pre-approval: The first step determines your eligibility for the FHA loan.
- Commitment: Providing additional documents will seal your approval and provide you with concrete information on the monetary amount you can borrow. This better-than-cash offer will help you greatly when you go to make an offer on a home.
- Down Payment: The down payment percentage determined by your credit score will be paid
- Appraisal: This step appraises the property to determine its value.
- Closing costs: Finally, you must pay any fees or deposits associated with the sale process.
Give the experienced team at Compass Mortgage a call and let us help you buy the home you always wanted.