Why do you need an FHA loan? The answer is simple: low credit scores, flexible guidelines, and small down payments. For any borrower with less than perfect score, the mortgage has ample benefits to shower. Believe it or not, millions of borrowers have subscribed for the mortgage over the years. And the number is likely to grow. Before jumping into the application process, you should understand the FHA loan requirements in and out. The FHA guidelines on the handbook would take weeks to finish, so you need a shortcut.
If you are running low on cash reserves or worrying about a shortage of credit scores, an FHA loan seems to be a feasible option. You should consider the mortgage seriously because you can save a lot on the interest rates. So, yes, the loan rates are extensively lower than the conventional mortgage rates. The mortgages are assumable, and the borrowers with high debt-to-income ratios can apply. As the advantages are nothing like you have seen before, you would like to check out the requirements, right? Let’s have a look at the FHA loan requirements Texas below.
FHA Down Payment Requirements
FHA down payment can be as low as 3.5% as long as your credit score is 580 or higher. When your credit score hits lower than 580 but higher than 500, you can put down 10% of the loan value. Either way, FHA mortgage insurance is added to the closing costs or monthly payments. If you cannot put down anything, you should ask the lender about the down payment assistance programs. In the form of a forgivable community second loan, you can get financing up to 6%. Besides this option, you can receive down payment as a gift. It is best to save for the down payment before applying for the loan application.
FHA Loan is not for First-Time Borrowers
The reality is the exact opposite of the popular belief – FHA loans are for everyone. The mortgage has gained fame among first-time borrowers because of the flexible guidelines. The millennials face more hiccups while applying for conventional mortgages. With the low down payment and credit score requirements, the first-time borrowers can easily qualify for the mortgage. After all, they undergo the challenges of carrying adequate cash reserves for the down payment or closing costs. If you are not a first-time borrower, you can refinance an FHA loan. Make sure you pass the loan requirements.
Re-check Income Requirements
The government-backed mortgage, FHA loan, is suitable for risky borrowers. That’s why; the lenders check whether you can pay back. Before processing the loan application, the lender checks your income records. So, a borrower must have two credit accounts, an account for down payment gifts, and no federal debt. You should also be clear of tax-related obligations before going further with the FHA loan process.
In the end, remember, FHA insures the loan but does not issue. Therefore, the lender finalizes the loan and offers much-needed help. So, talk to the lender about the property requirements and other essential factors.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.