Have you found your dream house but lack the means to buy it? Did you already apply for a conventional bank loan, but you were denied? Don’t give up on buying a home just yet. There are other financing options that might be fit for you — like the government-backed FHA Loan. Read on to know more about FHA loans and how you can apply for one.
Defining FHA Loan
An FHA loan is a mortgage loan issued by the government, specifically the Federal Housing Authority under the Department of Housing and Urban Development. These loans are insured by the FHA. This means that authorized lenders — such as FHA-approved banks and credit unions — have a safety net in case you default on your payments.
FHA loans are perfect for first-time home purchasers or those with a minimal budget. This is due to the relatively modest down payment rates that can go as low as 3.5%. You also don’t need a high credit score as 580 FICO is already sufficient. However, you still need to pay for mortgage insurance.
Moreover, gift assistance funds can be used as an added downpayment. However, you must provide the necessary certification to prove that such a fund was given as a donation with no repayment conditions or expectations.
The loan can be used to purchase different kinds of real property such as single-family houses, multi-family homes, and even condominiums. The money from certain variants of FHA loans can also be used to renovate already existing real estate.
What Are the Qualifications for an FHA Loan?
Apart from the down payment and credit score requirements, loan applicants also have to comply with the other requirements.
The FHA must first appraise the home you plan to buy, with the added condition that you must occupy the property within two months of closing.
Moreover, the house must be fit for residence, meaning that there should be no health hazards or compromised structural integrity. The overall design and build of the house should offer sufficient shelter and protection to its occupants. An inspection would be conducted to see if these parameters are met.
Also, you must use the property as your primary residence and not as a commercial investment or supplemental residence. Otherwise, you won’t be allowed to get a new FHA loan.
Are There Limitations to an FHA Loan?
Like all loan options, FHA loans have mortgage amount limits. Each county has varying limits, with the lowest being around $400,000 and the highest being close to a million. Typically, low-cost counties like Lucas have lower limits, while high-cost counties like San Francisco can reach the upper ceiling.
Don’t let your small savings prevent you from getting the house of your dreams. There are alternative financial solutions like FHA loans. If you’re looking for a Pennsylvania real estate agent that can help you on securing this loan and provide you with other excellent real estate services, the Ashley M. Miller Team is the one to choose. We are Your Home Heroes! Partner with us now and visit our site.