FHA Loan Options – Features and Requirements

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FHA loan options are among the most popular forms of mortgage loans, especially among first time home buyers. FHA is the abbreviation for Federal Housing Administration and FHA loans are mortgage loans insured by the government agency offered with very favorable conditions – here are a few more things that you should know about these loan opportunities.

The Features of FHA Loans

FHA loans being insured by a government agency, they come with low down payment requirements and very favorable repayment conditions. The down payment required from approved applicants usually ranges between 3.5-10%, depending on the borrower’s credit score, but the borrower must also pay mortgage insurance premiums to protect the lender’s money in case of a default.

The amount that applicants can borrow from FHA loan lenders approved by the federal government varies not only from one lender to the other, but regionally as well, the average loan amount currently being around $625,000. The interest rates that FHA loans come with are usually very favorable, but the exact percentage depends on the lender, the geographical area as well as on the credit score and other parameters of the borrower.

Who Can Qualify for an FHA Loan

Applicants who have a credit score of 580 or higher can qualify for a loan with 3.5% down payment, while applicants who have credit scores ranging between 500-580 are eligible for loans with 10% down payment. However, the credit score and the ability to make the down payment are not the only requirements of obtaining FHA loans:

  • Borrowers need to be employed with the same employer for at least two years or they are required to prove a steady work history,
  • They need to be legal residents of the US and they need to have a valid social security number,
  • FHA loans are available only for financing housing for primary occupancy,
  • The property to be purchased needs to be evaluated by an FHA-approved appraiser,
  • The monthly amounts paid towards the FHA loan, including HOA fees, taxes and insurances related to the home, need to stay under 31% of the borrower’s gross income,
  • The monthly amounts paid towards all the debt accrued by the borrower, including the FDA loan and the related fees and taxes, credit card debt, car loans, student loans, other loans, need to stay under 43% of the borrower’s gross income,
  • Borrowers need to be out of bankruptcy for at least 2 years and out of foreclosure for at least 3 years.

FHA loan lenders can take into consideration attenuating circumstances and they can decide to make exceptions, approving applicants who do not entirely meet the conditions above, but in each case an exception is made, the lender must provide thorough justification for the decision.

To find out whether you qualify for a loan offered by FHA lenders and to see what the FHA loan options available to you are, you can carry out a quick online search – enter the search term FHA loan followed by the area where you want to buy a home and you will get lots of different calculators and websites of lenders that offer this type of loans. Follow up with reliable Denver mortgage brokers for detailed information and services.