Best Mortgage Rates for Federal Housing Administration Loans
An FHA loan is a mortgage insured by the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development (HUD). Borrowers with FHA loans pay for mortgage insurance, which protects the lender from any loss if the buyer defaults on their loan. FHA loans provide lower down payments and have less strict lending standards allowing more flexibility for buyers to qualify. FHA loans are available to seniors (62 and older), first-time home buyers and those with a low annual income. With these types of loans, a HUD housing counselor can guide you through the process, but Best Mortgage Rates also makes it possible for you to search for the best mortgage rate for this type of home loan.
The FHA itself is not a lender; it is an insurance fund. Therefore borrowers must obtain their mortgage through an FHA approved lender and not the FHA directly. Interest rates and costs vary depending on the FHA approved lender. The services and underwriting standards also vary among lenders so it is important to explore various lenders to find the right fit for you.
How to Qualify for an FHA Loan
FHA loans make it affordable for lower-income individuals and families to purchase a home because FHA loans are federally backed. Are you wondering if you qualify for this type of loan? Below are the qualifications for an FHA loan:
- Mortgage insurance premium (MIP);
- Monthly premium required in some instances; and
- Down payment.
In order to qualify for this type of loan, a borrower must meet these three eligibility requirements. First, the borrower must meet all FHA credit criteria, the borrower must be eligible for 96.5% of the total financing, and the borrower must be purchasing a one-to-four unit structure. If you do not have at least two lines of credit, then the FHA may be able to approve you after filling out a substitute form.
The FHA will review your overall pattern of credit to notice any consistent late payments or other issues of concern. The minimum credit score for FHA loans depends on the type of loan the borrower needs. Those with credit scores under 500 are typically ineligible for FHA loans. FHA will make allowances under specific circumstances for home buyers who have insufficient credit if they meet certain requirements. If you are still completing the process of Chapter 13 bankruptcy or two years have not yet elapsed since Chapter 7 bankruptcy, then you may not be able to qualify for an FHA loan.
The FHA requires that most buyers have a down payment of 3.5% of the purchase price of the home. Unlike other available mortgages, the FHA allows the home buyer to not only use their own savings for the down payment, but a grant from state or local government programs or even a gift from a family member.
There are two mortgage insurance premiums required on all FHA loans. Upfront, 1.75% of the loan is due and is paid when the borrower obtains the loan and can be financed as part of the loan. The second mortgage insurance is called the annual premium, which is paid monthly and varies on the length of the loan.
Best Mortgage Rates Can Help
FHA loans make it possible for people to become homeowners who normally may not qualify. If you are considering buying a home by way of an FHA loan, you can search Best Mortgage Rates’ system to shop and compare between various FHA lenders throughout the nation. Our online tool is easy to navigate and it can help you find the best mortgage rate for your FHA loan.