FHA LOANS: WHAT ARE THEY?
Here at Perennial Mortgage Group of Raleigh, we proudly offer a wide range of mortgage loan options to serve every budget, need and homebuying preference. One of our most popular options is the FHA loan — a government-backed mortgage that requires only a small down payment, has minimal credit requirements, and comes with competitive interest rates. It’s a great choice for first-time homebuyers, as well as buyers looking to lower the costs of homeownership, especially up-front.
If you’re interested in using an FHA mortgage loan for your Raleigh home purchase, then reach out to Janice Fowler today or learn more about these types of mortgage loans below.
FHA LOANS: THE FACTS
FHA mortgages are home loans backed by the FHA, or Federal Housing Administration. They’re specifically designed for lower- and middle-income earning households, offering low down payments (just 3.5 percent) and less-stringent credit score requirements than other mortgage loan options.
FHA LOANS: THE REQUIREMENTS
As with any mortgage loan, you’ll need to meet certain credit, income and other requirements before you’ll be approved for an FHA mortgage. Fortunately, these requirements tend to be less demanding than other home loans you can choose from.
Here’s a quick look at what an FHA mortgage loan requires:
- Credit Score: As low as 500
- Down Payment: As low as 3.5 percent
- Debt-to-income Ratio: As high as 50 percent
- Property: Must be your principal residence within 60 days of closing
- Employment: Verifiable employment for the last two years
In the event you’ve had a significant credit event (bankruptcy, foreclosure, etc.), you’ll need to wait anywhere from one to three years before applying for your FHA mortgage.
FHA LOANS: WHO ARE THEY RIGHT FOR?
FHA mortgages can be used by any consumer, but they’re the best choice for first-time buyers in particular. They’re also a good fit for buyers whose credit may not be stellar or who have high debt-to-income ratios. If you’re short on savings, they can also be a good choice thanks to their low down payment requirements.
FHA loans are not a good fit if you’re shopping in a high price range or you qualify for a VA or USDA mortgage. (These require no down payments and can save you significantly).
FHA LOANS: THE PROS
Raleigh homebuyers can see serious benefits by using an FHA loan. Most importantly, they only require a 3.5 percent down payment, which significantly reduces the costs of homeownership and may even help some buyers purchase a home sooner.
Additionally, FHA loans often mean an easier mortgage process on the whole, largely due to their less-stringent credit and DTI requirements.
All in all, the benefits of FHA loans include:
- Low down payment requirements
- Competitive interest rates
- Less demanding credit and DTI requirements
FHA LOANS: THE CONS
There are, of course, downsides to using an FHA loan to buy your home, and their required mortgage insurance premiums may just be the biggest. FHA loans require both an up-front and annual mortgage insurance premium, which clocks in at 1.75 percent at closing and then up to 1.05 percent annually for the life of the mortgage.
If you’re looking to purchase a high-priced property, you may also find that an FHA loan isn’t a good fit. These mortgages are capped at $472,030 in most areas of the U.S.
Here are a few of the commonly cited drawbacks of FHA loans:
- No high balances allowed
- Up-front and annual mortgage insurance premiums
- Must use an FHA-approved lender
FHA LOANS IN Raleigh
An FHA loan could be a good option. Reach out to Janice Fowler today to learn more or discuss your options. The Perennial Mortgage Group team is here to help.