For those with difficult financial circumstances managing your credit score is a very high challenge. An even bigger challenge is becoming a home owner. Which makes the FHA loans an excellent for those who cannot meet the strict requirements of conventional loans. They include a host of benefits and are one of the most popular loan programs in the market. If you want to know more the best person to call would be Dawn Palestini of Palestini Home Loans. She is the expert with years of experience in the field and one of the best loan officers in the California market. Dawn believes in more than just being professional, she believes in having the client’s best interest at her and delivering the best service.
What is an FHA Loan?
A conventional loan can have a down payment requirement of up to 20% while also requiring the borrower to have a very high credit score. This is quite a difficult situation as most borrowers cannot meet these requirements. Either their credit score is too low or else they do not have the finances to cover such a large sum for the upfront payment.
FHA Home Qualifier
This loan is a great option for people whose credit scores are 580 and higher, and who have a 3.5% down payment.
“These loans are insured by the Federal Housing Administration (FHA).
The FHA protects lenders against defaults on payments. This makes it easier for you to qualify, and allows lenders to offer lower interest rates.”
The Federal Housing Authority or FHA has sponsored and backed a program that is intended to ease this difficulty especially in times of real estate market recession. The intent of the program is also to assist those who cannot qualify for a conventional loan when they have a lower credit score or cannot meet the high down payment requirement.
Although the guidelines are set by them, the lending itself is not done by the FHA but instead other financial organizations like banks and private lenders. Being a government sponsored program this loan is welcomed by these financial institutions with open arms are there is less risk involved due to the guarantee provided by the FHA.
What Benefits do FHA loans offer?
-Down payments dropping as low as 3.5%, much lower than conventional Loans.
-Lower rates on Private Mortgage Insurances
-Compared to Traditional Loans, the interest rates are lower.
-Flexibility on Credit Score, where even lower scores are acceptable.
-Acceptance of non-traditional methods of credit history.
-Qualification is possible on high Debt to Income ratios too.
-Repayments in the form of Gift Funds are accepted.
What is needed to qualify for a FHA Loan?
Credit Score: Contrary to Conventional Loans, which require a credit score of above 600, FHA loans accept credit scores steeping as low as 500. However, the amount required as a down payment vary inversely with these credit scores. Therefore, the higher the credit scores, the lower the down payments. Even so, if you have a credit score in the range of 580 you can manage a down payment of 10% which is lower than what would be provided with a conventional loan.
Employment Proof: Not unlike other loans, you are required to show ability of repayment and therefore required to show proof of income and employment. This can be easily done with a few pay stubs and a letter of employment provided by your employer stating completion of at least 2 years of service with the organization. These details are verified before approvals.
Proof of Residence: Another criterion that is easily met is proof of residence. In order to qualify for a FHA Loan, you would need to provide proof of current residence that can be done via a property lease or utility statements.
Primary Residence: Very similar to other government sponsored programs, in order to be eligible for a FHA Loan as per guidelines set, the property against which the mortgage is should be intended to be utilized as the primary residence of the borrower.
PMI: Although offered at lower rates due to the backing of the FHA, a Private Mortgage Insurance is a requirement set that must be borne by the borrower.
I am Proudly Serving These Areas
NMLS ID #361616
CA Lic. #CA-DBO361616
490 Chadbourne Rd #A172
Fairfield, CA 94534
We've been helping customers afford the home of their dreams for many years and we love what we do.
Xpert Home Lending, Inc. is a Real Estate Broker Licensed by the California Department of Real Estate DRE #02166758 NMLS: 2179191
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