Whats an FHA loan?
FHA loans are backed by the U.S. government through the Federal Housing Administration.
The FHA doesnt lend you money; it insures the loan.
That means the FHA will pay your lender if you stop making mortgage payments.
As a result, its less risky for lenders to give mortgages tobuyers with lower credit scoresand down payments.
you might get an FHA mortgage with just 3.5% down if your credit score is 580 or higher.
If your credit score is between 500 and 579, youll be required to put 10% down.
Here are nine things to know before you apply for one.
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Pay stubs and consistent tax returns are important when you apply.
Consistent work for a year or more with the same employer helps, too.
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3.
Many will require a score above 580.
Buyers can improve their credit by paying down debt and making on-time payments for credit cards and auto loans.
Think Beyond Single-Family Homes
FHA loans arent just for people looking to purchase a single-family home.
you’re free to use them to buy condos, duplexes, manufactured homes and more.
The only requirement is that buyers live in the FHA loan property for at least one year.
There are limits to how much you could borrow with an FHA loan.
These limitsvary by countyand are based on home prices in the area.
Of course, rolling closing costs into your loan will increase your monthly mortgage payments slightly.
The upfront premium is equal to 1.75% of the loan amount.
That could translate to around $130 a month for a home loan of $210,000, for example.
Your mortgage must remain an FHA loan, and you have to be current on your payments.
The good news is that many lenders are currently offering this program with no closing costs.
Is an FHA Loan Right for You?
Kurt Schultheis is a Florida-based writer.
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