Pillar Mortgage Serving Florida & Michigan
Have you been thinking about getting an FHA loan and wondering what exactly is an FHA loan? What about who might the best FHA lender in Florida & Michigan? Well! Worry no more. At Pillar Mortgage, we have the best and customer friendly rates in Florida and Michigan.
In this article, we will take a more in-depth look at FHA home loans. We’ll discuss definitions, advantages, their requirements, and the best FHA lender option among other important things you should know.
What is an FHA loan?
FHA loans are famous due to their lenient guidelines. Home clients can qualify with a credit score rating of as low as 580 and 3.5% down. It’s easy to get FHA financing because most creditors are FHA-approved. However, that doesn’t mean that you have to go with simply any FHA lender.
An FHA mortgage loan is a government-backed loan insured through the Federal Housing Administration. FHA home mortgage loans need lower minimal credit score rankings and down payments than many other home loans. Preferable for first-time homebuyers.
Pros
- Do away with mortgage insurance. All FHA home mortgage loans come with mortgage insurance. By refinancing an FHA home loan into a conventional refinance home loan, you can do away with mortgage insurance – that is if you are able to have at least 20% equity in home.
- Tap into home equity. An FHA cash-out loan refinance or 203(k) loan could decrease your monthly payment or even change your term and provide you with cash to pay off high-interest debt.
- Decrease your monthly payment. You can save by dropping your home loan mortgage insurance premiums, getting a decreased loan interest rate or even financing a reduced principal balance now that you closed on your home.
- Avoid forbearance. Lesser payments can assist struggling homeowners who may be considering forbearance, which reduces or suspends mortgage loan payments temporarily. In some cases refinancing is more advantageous for homeowners than to go into forbearance. Having your monthly payments reduced can help you sustain your homeownership.
- Save on the overall interest costs. A smaller loan interest rate can help you save on your mortgage payment and the interest in the long term.
- You can change to a different type of loan. You have the ability to refinance from an adjustable-rate mortgage to a fixed-rate loan with ease, or the other way round with an FHA streamline refinance.
Current FHA loan requirements
FHA loans are usually very easy to get approved for compared to other types of loans – especially if you have a credit history that is not as strong as you’d like. This is all thanks to the backing they get from the Federal Housing Administration.
To qualify for an FHA loan, most FHA-approved lenders require:
- A minimum credit score of 580. However, some of them may approve your loan with a 500-579 FICO score, but this is only if you are able to make a 10% down payment. These are usually favorable credit requirements than most of the other mortgage loans.
- If your credit score is 580 or higher, you can then enjoy a low down payment of at least 3.5%.
- Maximum debt-to-income ratio (DTI) of 50%. This simply means that your new mortgage payments, combined with your other ongoing debts such as credit cards, student loans, and auto loans, can’t go beyond half of your monthly income before tax.
- Strong employment history that shows a consistent income that will probably last for at least 3 years after the loan closes.
- A fairly clean credit history that doesn’t show any foreclosures for the last 3 years.
- The home you are purchasing must be your primary residence. That’s in most cases a single-family home; all though the Federal Housing Administration can also insure a 2, 3, or 4-unit property only if you as the owner will be living in one of the units full-time.
- Lastly, the property you’re purchasing or refinancing should be within the current FHA loan limits.
If you are planning to buy a home in an area where the average home prices are high, the FHA loan limits might be higher, as well.
Contact us today and we will be more than ready to verify your FHA loan eligibility in Florida or Michigan.
How many FHA loans can you have?
This is a question most homebuyers ask – especially those who are not first time homebuyers and have taken an FHA loan in the past.You can get more than one FHA loan in your lifetime. Nevertheless, while you don’t have to be a first-time homebuyer to qualify for it, you can only qualify for one FHA loan at a time. This is meant to prevent potential borrowers from using the FHA loan program to buy investment properties.
On the other hand, you could qualify for an additional FHA loan without paying off or selling your current property under the following situations:
- If you are relocating to an area that’s past a reasonable commuting distance to your current home or where you can’t get affordable rental housing available.
- If you are moving out of a jointly owned property to buy your own home, and your co-owner plans on remaining in the current home – like in the case of a divorce.
- If you cosigned an FHA loan with someone else and you’re now wanting to purchase your own home.
- If you want to buy another home with an FHA loan in order to accommodate your growing family. In this case, you’ll need to provide the following:
- Evidence that shows the increase in dependents and your present home’s failure to accommodate the growth.
- You will also need a minimum of 25% in equity in your current home to qualify; if it’s below that, you will be needed to pay down the loan balance until you reach at least 25% in equity to qualify.
If you are able to get one of these exemptions, you then qualify for another FHA loan.
Pillar Mortgage – The Best FHA Lender in Florida and Michigan
We have uncovered what an FHA loan is, pros and cons of an FHA loan, the requirements. If this sounds like your best option for a home now is the best time to get your FHA loan. As one of the best FHA lenders in Florida & Michigan, let us help you with your mortgage.
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