4 Key Facts to Know before Applying for an FHA loan with 3.5% Down Payment

Are you a first-time homebuyer, who has little savings or credit challenges? Then, you can choose an FHA home loan program. Guaranteed by the Federal Housing Administration and offered by the FHA-approved lenders, this loan program will help you to qualify for a home loan and buy or refinance single-family homes, two to four-unit multifamily homes, condos and certain manufactured and mobile houses.

Even if you can’t make a down payment more than 3.5%, you can apply can qualify for this loan program, as there are several lenders, who offer an FHA loan with 3.5% down payment. Are you still in doubt? Consider this real-life example, where a house was sold on 12/13/2019 at 10026 Lynnwood Dr, Baytown, TX 77521 for $225,000 with 4 bedrooms and 3 bathrooms and the size of the home is 2,222 Sq Ft. With an FHA home loan program, the down payment would be only 3.5% or $7,875 and the loan amount is $217,125 and the cash to close including closing costs could be $5,603.75. 

Before you apply for the loan, be familiar with these crucial facts that are related to the loan.

  • It is easier to qualify for

When compared with the conventional loan programs, an FHA loan is easier to qualify for. The basic requirements to qualify for this loan include a credit score of 500 or higher, a debt-to-income ratio of 50% or less, a minimum 3.5% down payment, etc. Besides, the loan rules make allowance for borrowers who might not have an extensive credit history or who need to use gift money to make a down payment.

  • This loan can help you to avoid foreclosure

If you are facing default or are already in default on an existing FHA mortgage, the Making Home Affordable program may be able to help you reduce your loan payments and avoid foreclosure. This FHA program isn’t a refinance; instead, your loan is either modified to give you a more affordable monthly payment and/or the Department of Housing and Urban Development offers you with a no-interest loan to cover overdue payments, known as a partial claim.

  • This loan can help you after a disaster

You never know when a natural calamity is going to ruin your life. If you are currently living in an area that is declared as a disaster zone, then the FHA 203(h) Mortgage Insurance for Disaster Victims program can offer you with full-financing for the purchase or reconstruction of a home severely damaged or destroyed in a disaster. But you should keep this in mind that FHA 203(h) loans are only available for single-family homes or condos, and you need to apply within one year of a disaster declaration.

  • The loan terms can vary by lender

While the FHA sets minimum requirements, individual FHA lenders can set their own rates and terms. And for this, the loan term can vary from a lender to another one. So, it is a good idea to shop around and compare loan offers. Getting a mortgage preapproval from more than one lender will let you see the total cost of the loan, along with FHA closing costs and other fees.

As you are now familiar with the key facts related to FHA loans, without waiting any further, opt for an FHA-approved lender and apply for the loan today.

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.

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