The Federal Housing Authority backed mortgage,
also known as FHA loans make home-ownership an achievable dream for many
first-time homebuyers – thanks to flexible borrower requirements. Compared to
conventional loans, FHA loans are easier to obtain due to many reasons, such as
a low down payment of only 3.5 percent, and a low credit score. Despite it
being an easy financing option, not everyone qualifies for FHA loans as there
are few criticalities involved. In this article, we discuss these all the aspects
of FHA loans. Let’s start.
FHA Loans: Mortgage for Primary Residence
Federal Housing Authority doesn’t directly
provide FHA loans to people. Borrowers get this loan from FHA-affiliated lenders, and FHA’s task is to
insure the loan. There are numerous FHA loan lenders in Texas, Virginia and
other states who provide these loans based upon a uniform set of guidelines set-up by the FHA. The FHA,
however, provides flexibility to lenders in setting standards for determining
basic requirements and loan eligibility.
FHA loans are financed only for borrower’s
principal residence that needs to be owner-occupied. This loan may not be
utilized for rental properties or any other form of investment. Other
properties eligible for FHA loan includes: townhouses, row houses, detached and
semi-detached houses.
Maximum Loan Amount
The maximum loan amount a borrower can receive
with FHA loan program depends on two factors:
1.
The
statutory limit for the geographical area where the property is located.
2.
The
loan-to-value ratio for the specific property.
Though, with all these factors in hand, in
most areas loan limit is $271,050; however, in costly areas such as Alaska and
Hawaii it goes up to $625,550.
Credit Score Requirement
A minimum credit score requirement for getting
any conventional loan is 620, however, a credit score of 500 works for FHA
loans. It means that people with poor credit score may easily qualify for FHA
loan programs. Though, a borrower may be disqualified from availing this loan
scheme in certain situations such as if he fails to make timely payment of
bills or any other dues.
Employment and Income Requirements
Borrowers with basic eligibility criteria of
stable employment and income are eligible for FHA loan program. Usually,
lenders like to see two years of steady employment history and lenders also
expect borrowers to continue the job for at least next three years after
obtaining the loan.
