July 31, 2020

Is an FHA Loan Right for Me?

Unlike traditional home financing options, FHA loans are backed by the federal government. This means more opportunities for potential homebuyers meeting FHA lending qualifications.

Compared to other types of home loans, FHA loans offer more flexible down payment and credit requirements. Although a good credit score, steady income, manageable debt, and being able to come up with a down payment will factor into final lending decisions, the flexibility FHA loans offer can make all the difference in owning vs. paying rent to someone else.

Invest in Your Future

One of the biggest roadblocks to owning a home is saving enough money for a down payment. A survey conducted by the Home Buying Institute showed almost two-thirds of borrowers said the FHA loan’s low down payment requirement was its most attractive feature. 

  • Borrowers with a minimum FICO (credit) score of 580 qualify for a down payment of just 3.5 percent—even on multi-unit properties. This means that, on a $200,000 home, you’d need to make a $7,000 down payment. And, since money gifted to you by family members meets down payment requirements, you can stretch your own money even further.
  • For borrowers with a credit score of 500-579, a 10% down payment is required. Although you might have to make a larger down payment, FHA loans offer lending options that you might not be eligible for within conventional mortgage programs.  

Refinance to Meet Your Goals

If you’re a current homeowner, there’s a pair of FHA loans that might help put the equity you’ve built to work for you. 

  • An FHA Cash-Out Refinance loan can help you fund home improvements or renovations, cover college tuition or student loans, or just get access to cash. To be eligible, you’ll need a 580 credit score, at least 15% equity in the property, and a track record of on-time payments for the past 12 months.
  • A second option available to current FHA borrowers is an FHA Rate and Term Refinance. Why pay more than you have to? Since you’ve already been through the FHA lending process, an FHA Streamline is the easiest way to lower your rate and refinance with the least amount of documentation required. Shortening your term may help to reduce your interest rate as well, improving the overall terms of your mortgage. The FHA allows Rate and Term Refinances of up to 97.75% of the appraised value of the property.

We’re Here to Help

When it comes to the type of mortgage you choose, there’s really no right or wrong answer—every family’s goals and dreams are different from the next. Contact us, or call 877-466-2678, and let one of our experienced BayCoast Mortgage lending professionals help you decide if an FHA loan is right for you.

Print Friendly, PDF & Email