AlabaLooking to save money on a down payment and enjoy a low interest rate on a loan? You may want to think about applying for an FHA loan. With an FHA mortgage in the Tri-Cities area, your down payment could be just 3.5%.
Many homebuyers are familiar with the FHA loan program. FHA loans are backed by the Federal Housing Administration, which is why these types of loans include so many benefits.
But there are a few things which you may not know about FHA mortgages. Here are some which may surprise you.
1. FHA loans are not just for first-time homebuyers.
You may have heard that FHA loans are a mortgage product specifically for first-time homebuyers. In some respects, this is true; they are ideal for those who are shopping for their first home. But they are not limited only to these consumers.
This could be your first home, your second, or your third. It does not matter how many homes you have purchased in the past. FHA loans are open to all qualifying homebuyers. So long as you meet the basic eligibility requirements, you should be able to use an FHA loan to purchase a home in the Tri-Cities.
2. Your down payment will depend on your credit score.
One of the reasons FHA loans are so popular is that they have looser credit requirements than many conventional loans. First-time homebuyers often are still working on building up their credit, which is why FHA loans are so great in that situation.
What you may not be aware of however is that the 3.5% down payment is only available if you have a certain minimum credit score. Broadly speaking, this is 580, but quite a few lenders will only offer it if your score is 600 or even higher.
If your score does not meet the required minimum for the 3.5% down payment, your down payment will typically be 10% instead.
3. You might need to get mortgage insurance.
You probably know that mortgage insurance is usually required when you take out an FHA loan, but did you know that this requirement doesn’t go away as you build up your equity?
It used to be that you could stop paying for mortgage insurance once your equity reached 20%. But that was only the case up until 2013. Since then, the mortgage insurance requirement has been extended for the loan’s entire lifetime.
There is an exception; if you are willing to put down 10% as your down payment instead of 3.5%, the requirement may be waived. You will need to do the math and figure out what is best for your financial situation.
4. A bankruptcy or foreclosure may not stop you from getting an FHA loan.
You might think that you need a perfectly clean financial record to qualify for an FHA loan. But this is not true. An FHA loan may be perfect for those who need a second chance.
There is a time requirement associated with both. If you were foreclosed on, at least three years must have passed before you will be eligible for an FHA loan. If you declared bankruptcy, you must wait two years before applying for an FHA loan.
5. You must be purchasing a property within the FHA loan limits to qualify.
Finally, there are some special requirements for the property itself which you want to purchase. To begin with, it will need to fit within the FHA lending limits. These limits are updated each year and are specific to each county across the country.
In Colbert County, the limits are as follows for 2018:
- Single: $294,515
- Duplex: $377,075
- Tri-plex: $455,800
- Four-plex: $566,425
If a house falls above these limits, it will not qualify. If it falls within them, it may qualify. But first, the US Department of Housing and Urban Development (HUD) will inspect it. Only if the house passes the inspection will it be eligible for FHA funding.
Need Help Applying for an FHA Mortgage in the Tri-Cities?
Prime Mortgage Lending Inc. works with customers in the Tri-Cities to apply for FHA loans as well as other types of government-backed mortgages. We can help you figure out if you are likely to qualify for an FHA loan, and can assist you with the application process. To begin, please give us a call at (256) 690-5132.