Are you wondering how to get an FHA loan? The Federal Housing Administration insures FHA loans as it is a loan backed by the government. An FHA loan requires a minimum credit score and a low down payment compared to conventional loans. It is no wonder first-time home buyers are looking to FHA for their loan origination. FHA loans are government-insured and issued by third-party lenders.
FHA loans are intended for borrowers who are having a hard time applying for a private mortgage because of qualifications that are difficult to meet. These fixed interest rate loans come in 15-year and 30-year terms. The borrower must be prepared to pay for the FHA mortgage insurance, which is usually necessary for borrowers who can only come up with a down payment of less than 20 percent of the loan.
One of the things you need to consider when you are asking yourself how to get an FHA loan is the mortgage insurance premiums that you need to be aware of. Consider these:
- Annual mortgage insurance premium. This insurance premium depends on the loan amount and the LTV or initial loan-to-value ratio. Depending on how long your loan may be, 15 years or 30 years, it can be as low as 0.45% to 1.05%, with the premium paid in 12 monthly payments.
- Up-front mortgage insurance premium (UFMI). FMI can be paid during closing or rolled into your mortgage payments.
To qualify for an FHA loan, you must have a FICO score of at least 500-579 to be eligible for a 10% down payment. If you score 580 or higher, you can qualify for a 3.5% down payment. You also need to prove that you have a stable source of income for the last two years by preparing your financial documents by submitting your tax returns, bank statements, and pay st bs. Talk to our officers for more updates on getting an FHA loan.