FHA Home Loans
FHA home loans are mortgage loans that are insured against default by the Federal Housing Administration (FHA). FHA loans are available for single-family and multifamily homes. These home loans allow banks to continuously issue loans without much risk or capital requirements. The FHA doesn’t issue loans or set interest rates, it just guarantees against default.
FHA loans allow individuals who may not qualify for a conventional mortgage to obtain a loan, especially first-time home buyers. These loans offer low minimum down payments, reasonable credit expectations, and flexible income requirements.
- What is an FHA Loan?An FHA loan is a mortgage insured by the Federal Housing Administration (FHA).
- An FHA loan is a mortgage insured by the Federal Housing Administration (FHA).
- It is designed to help low and moderate-income borrowers purchase homes with a lower down payment and more flexible credit requirements.
- Who is eligible for an FHA loan?
- homes with a lower down payment and more flexible credit requirements.
- Eligibility criteria may include a steady income, a credit score of 580 or higher for a 3.5% down payment, and a 500-579 score for a 10% down payment.
- How much is the down payment for an FHA loan?
- The minimum down payment requirement for an FHA loan is typically 3.5% of the home’s purchase price.
- However, if your credit score is below 580, you may be required to make a 10% down payment.
- What are the credit score requirements for an FHA loan?
- FHA loans are more lenient with credit score requirements than conventional loans.
- A credit score of 580 or higher usually qualifies for the 3.5% down payment option, but scores between 500 and 579 may require a 10% down payment.
- FHA loans are more lenient with credit score requirements than conventional loans.
- Does Bankruptcy Impact FHA Loans?
- No, generally a bankruptcy won’t preclude a borrower from obtaining a FHA Loan. Ideally, a borrower should have re-established their credit with a minimum of two credit accounts such as a car loan, or credit card. Then wait two years since the discharge of a Chapter 7 bankruptcy, or have a minimum of one year of repayment for a Chapter 13 (the borrower must seek the permission of the courts). Also, the borrower should not have any credit issues like late payments, collections, or credit charge-offs since the bankruptcy. Special exceptions can be made if a borrower has suffered through extenuating circumstances like surviving a serious medical condition, and had to declare bankruptcy because the high medical bills couldn’t be paid.