All The Facts About FHA Loans

A FHA loan is a great way for people to buy or refinance a home. Down payments can be as low as 3.5 percent of the home purchase price, and the loan can include most fees and closing costs. The Federal Housing Administration insures the loans, and borrowers pay mortgage insurance, meaning that lenders such as Loan City Home Loans are protected from a loss if a borrower cannot pay. It also means Loan City can provide these loans at lower interest rates and with more flexible standards.

Various Types
There are plenty of FHA loans for various needs. For example, there is a mortgage product that focuses on energy efficiency if you want to make energy improvements. There is also a reverse mortgage for people at least 62 years old who own their houses or who don’t have much left to pay. The FHA also provides loans for mobile housing and factory-built homes—and for fixer-upper homes.

Lenders
The Federal Housing Administration does not function as a lender. It is really an insurance fund, so home buyers get their loan approved through lenders such as Loan City. Factors such as interest rate and cost vary among lenders.

Credit Scores
The minimum credit score needed to qualify for a FHA loan depends on the loan type, but in general, aim to score at least 580. The lower you score, the more you have to pay for the house up front. For example, if your credit score falls between 500 and 579, you will generally qualify to borrow 90 percent of the home’s value, meaning you will need to provide a 10 percent down payment.

The good news is that the FHA does not automatically deny applicants with credit scores of less than 500. Ask Loan City if you might qualify, especially if you have an unusual credit history.

Mortgage Insurance Premiums
You pay two mortgage insurance premiums on all FHA loans. One is 1.75 percent of the loan. It’s paid at the time of the loan but can be part of the loan amount. The second premium amount depends on the amount borrowed (the higher the down payment, the lesser the premium), loan length and the loan-to-value ratio. Premium amounts can range from about 0.70 percent to 1.3 percent.

Please contact Loan City Home Loans with any questions and to find out how you could benefit from a FHA loan.