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Frequently Asked Questions for FHA Loans

by Teresa Boyd 11/26/2018

If you’re hoping to buy your first home in the near future, you’re likely wondering about the different types of mortgages that you may qualify for. Since the 1930s, the Federal Housing Administration (FHA) has been insuring home loans for first-time homeowners across America.

This program helps people achieve homeownership who typically wouldn’t be able to afford the down payment or pass the credit score requirements to secure a traditional mortgage.

In today’s post, we’re going to answer some frequently asked questions about FHA loans to help you decide if this is the best option for your first home.

Does the FHA issue loans?

Although they’re called “FHA loans,” mortgages are not actually issued by the FHA. Rather, they’re issued by mortgage lenders across the country and insured by the FHA.

Will I have to make a down payment?

With an FHA loan, your down payment can be as low as 3.5%, significantly lower than traditional loans at 20% down payment. However, you will be required to pay private mortgage insurance (PMI) in addition to your monthly mortgage payments until you have paid off 20% of the home. So, the best case scenario would be to save as much as possible for a down payment to reduce the amount of mortgage insurance you have to pay.

What are the benefits of an FHA loan?

The three main reasons to secure an FHA loan are:

  • You can qualify with a low credit score

  • You can make a smaller down payment than traditional mortgages

  • Your closer costs will be less expensive

Where do I apply for an FHA loan?

You can apply for an FHA loan through a mortgage lender. You can also work with a mortgage broker to help choose a lender.

Is an FHA loan the only loan option for low down payments?

There are multiple loan programs offered at the state and federal level to help individuals secure a mortgage with a lower down payment. They can be provided by the Department of Veterans Affairs, the USDA, or state-sponsored programs. Lenders also often sponsor their own programs to attract potential borrowers. However, always make sure you compare these programs to make sure you’re making the best long-term financial decision.

Do all FHA loans offer the same interest rates and costs?

No. Since the loans are only insured by the FHA, it’s up to the lender to determine your interest rate and fees. So, it’s a good idea to shop around for the best lender.

How high does my credit score have to be to qualify for an FHA loan?

You can secure a mortgage with a down payment as low as 3.5% with a credit score of 580 or higher. However, if you can afford to make a larger down payment, you can secure an FHA loan with a credit score as low as 500.

If your score is in the 500-600 range, it’s typically a better idea to spend a few months building credit before applying for a home loan.

What information will I need to apply?

You’ll need to gather all of the same information that you would for a typical mortgage. This includes W2s from your employer(s), two years of submitted tax forms, your current and former addresses from the past two years, and your gross monthly salary.

I’ve owned a house before, can I still qualify for FHA loans?

Even if you’re not a first-time homebuyer you can still qualify for an FHA loan. However, you cannot qualify if you’ve had a foreclosure within the last three years or have filed for bankruptcy within the last two years.

About the Author

Author
Teresa Boyd

I relocated to Ocean Isle Beach in 2002. Prior to that I lived in Maryland and worked for over 20 years in Washington, D.C. for the D.C. Court system and an office that prosecutes attorneys. I began my real estate career in 2006. 

The first year I worked as a real estate agent, I received the Rookie of the Year award. Each year since I have been recognized as a multi-million dollar sales agent and have consistently been one of the top producers in the company. Coldwell Banker National has recognized me with a Sterling Award for the number of sales transactions closed, The President’s Circle Award, and Coldwell Banker Sloane awarded me with the 2017 TOP PRODUCER Award for the highest sales volume. Long story short, I work hard for my buyers and sellers and it shows in my numbers!

I have been married for 34 years, have four children and eight grandchildren. I have been enjoying the South Brunswick Island area of North Carolina for over twenty years. Part of that time I was a vacationer here but the past 16 years I have called this my home. 

Call me and put my experience & knowledge to work for you. I look forward to working with you!