How To Qualify for an FHA Loan
Many home financing options can feel a little exclusionary for those of us who might need a little extra help in the financial department. Luckily, there are alternatives such as FHA (Federal Housing Administration) loans. Learn more about this alternative and how to qualify for an FHA loan so that you can get the funding you deserve.
What Is an FHA Loan?
Before we get into how you can meet the criteria for FHA loan approval, we need to discuss what an FHA loan is and how it differs from other types of loans. An FHA loan is funding backed by the Federal Housing Administration. This agency works exclusively under the jurisdiction of the Department of Housing and Urban Development. Because these loans have direct ties to these organizations, your lender has an extra layer of loss protection should you ever default on your loan.
And because FHA lenders don’t have to worry about high risk factors, the approval odds for this type of funding are usually much higher. These loans are also very feasible and attractive for first-time home-buyers, as their credit qualifications are much more lenient and the down payment requirements also tend to be significantly lower than those of more traditional loans.
What Are the Criteria for Qualification?
Once you decide that an FHA loan is the best option for you, it’s wise to look into the more specific criteria you’ll need to meet for approval. The good news is, you’ll have a much easier time qualifying for these types of loans. Below are some of the specific things that need to happen if you intend to use an FHA loan to finance your home:
- Your credit score must be at least 580.
- You should have a debt-to-income ratio of less than 43%.
- The home you’re interested in must be appraised by an FHA-approved professional.
- You cannot use FHAs to finance second homes or investment properties; the home you’re looking to purchase must constitute a primary residence.
- An official inspection of the property must be completed.
If you scan this list and find that you meet all the criteria, it’s likely that an FHA loan is a good option for you. However, if you find that you’re looking for funding that allows the purchase of investment properties, you can always call Streamline Mortgage to help you come up with a game plan that best fits your needs. And if you need alternatives, we can set you up with the best hard money lenders in Henderson.
What Are the Benefits?
Aside from more lenient qualifications, FHA loans come with a considerable number of benefits. For instance, you’re likely to qualify for an FHA loan even if financial issues such as bankruptcy are in your economic history. Just as well, because your lender won’t take on the inherent risk that other types of loans entail, they can lower your down payment significantly. Finally, closing costs are often additional fees on your home loan, so you don’t have to worry about paying a fortune upfront. You can simply move into your new home and enjoy.
So if you’re looking to buy a home and you need a little extra help, don’t worry! There are alternatives out there for you. Hopefully, our quick guide on how to qualify for an FHA loan has provided insight into how you can snag your dream home.