Buying a Home With an FHA Loan

FHA loans can enable people to buy a house when they may have not qualified for a mortgage otherwise. Offering minimum down payments of only 3.5%, highly competitive interest rates, and forgiving credit requirements, FHA loans are a great option for people who are looking to purchase a home but might not check all of the boxes needed for a typical loan. An FHA loan may be the perfect fit for you and can help you become a homeowner in no time! Let's dive into the specifics of buying a home with an FHA loan. 

What's an FHA loan?

FHA stands for Federal Housing Administration, but FHA loans don't actually come straight from the FHA. These loans come through private lenders. The role of the Federal Housing Administration is to insure the loan, not provide it. Essentially, the FHA is like an insurance company that insures lenders will not have financial loss if the borrower defaults on a loan. Since the FHA is backing these loans, lenders can lend the money out with looser requirements, as they know the money is backed. This is why FHA loans often have more flexibility with the screening process than a typical loan. 

What are the requirements?

So, now you know that an FHA loan is easier to obtain than a conventional loan, but what exactly are the requirements? To get an FHA loan, you will need to work with a loan officer to run a credit report and check the following requirements:

• A 3.5 minimum down payment
• A debt-to-income ratio below 50%
• A verified employment history of at least two years
• A credit score of at least 580

These requirements are more lenient than a conventional mortgage loan. It's important to review your reports and know if you should qualify before you work with a loan officer to confirm the details. 

FHA limits

As with any loan, there are limits to the type of house you can purchase. Most FHA loans have geographic restrictions. In other words, there is usually a price limit based on the average price of homes in your area, as well as property type limits. This type of loan is not for people looking to buy a second home or looking to buy an investment property. It is solely for renters looking to purchase their first home.

Modern Lending

If you think that an FHA loan may be right for you, reach out to the professional loan officers at Modern Lending to help you secure your dream home! Our team of experts has all of the knowledge needed to help you get the perfect loan and become a first time home buyer. Visit our website for more information on how to get started today.