FHA Loans

Are you looking to buy a home, but might be worried that your credit score or lack of a downpayment might impact you? This a program that could be a great option for you.

FHA Loans

The Federal Housing Association, part of the U.S. Department of Housing and Urban Development (HUD), is a government agency that has insured over 47.5 million home mortgages since it was established during the Great Depression in 1934. Those are some impressive numbers!

FHA Home Loans are mortgages that are backed by the Federal Housing Administration that have lower qualifying standards and rates than conventional loans, along with a lower downpayment of 3.5%.

For many people, this is an amazing program to help them become homeowners, especially if they may not qualify for other types of loans. Below are a list of some of the common questions people run into about FHA loans.

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Most frequent questions and answers

Yes you will, but it will be at a much lower rate than other loan programs out there. FHA loans require 3.5% down as a payment.

Yes, FHA loans require that the purchaser have mortgage insurance on the loan. While this might seem like a bad thing, there are ways to reduce the rates of MIP, including using a 15 year mortgage term, or making a downpayment of at least 5%.

FHA loans allow the individual to have a higher debt-to-income ratio, or DTI. Officially, the FHA maximum DTIs are as follows:

  • 31% of gross income for housing costs.
  • 43% of gross income for housing costs plus other monthly obligations like credit cards, student loans, auto loans, etc.
To get an approval at this high ratio, you’ll likely need one or more compensating factors – a great credit score, a large savings, or a down payment that exceeds the minimum.