The FHA loans are designed to help Americans with less than stellar financial situations buy homes. These loans are flexible and come with lower down payments as well as credit score requirements. This makes them ideal for first-time home buyers who cannot afford commercial mortgages.
However, taking a loan to buy a home is a huge decision that requires significant consideration. As such, it is important that you have the right information to help you make an informed decision while financing your home purchase.
First things first: Understanding FHA loans
FHA loans are a type of mortgage that are provided by private lenders but regulated and insured by the U.S Federal Housing Administration (FHA). Since they are government-backed, these loans allow Americans who would otherwise not afford traditional mortgages to buy homes.
FHA requires borrowers to pay upfront as well as annual mortgage insurance. Thus, should the borrower default on their loan, FHA would pay off the remaining loan.
Qualifying for an FHA loan
The primary goal of FHA loans is to ensure that homeownership is possible for as many Americans as possible. And since these loans are government-backed, qualifying for them is usually much easier than commercial mortgages.
The typical FHA loan requirements include:
- You must not have a history of foreclosure in the past 36 months
- You must have proof of steady income
- You must not have a history of bankruptcy in the last 24 months
- You must have a good pay record
- The home in question must be your primary residence
- Your debt to income ratio must not exceed 43%
FHA loans allow Americans who would otherwise not afford the traditional mortgage to own a home. Find out how you can make your homeownership dream come true with an FHA loan.