FHA Guidelines On Down Payment Is 3.5% Down Payment


FHA Guidelines On Down Payment Is 3.5% Down Payment

This BLOG On FHA Guidelines On Down Payment Is 3.5% Down Payment Was UPDATED On July 4, 2017

The Federal Housing Administration has created the FHA insured mortgage loan programs to make home purchase affordable to Americans.

  • FHA Loans are the most popular loan programs to home buyers, especially first time home buyers.
  • Under FHA Guidelines On Down Payment home Buyers can purchase homes with FHA Loans with 3.5% down payment.
  • Under FHA Guidelines On Down Payment, to qualify for 3.5% down payment home purchase FHA Loans, borrowers need at least a 580 credit score.
  • Home buyers with under 580 FICO Credit Scores can qualify for FHA Loans, but 10% down payment is required under FHA Guidelines On Down Payment.
  • HUD, the parent of FHA, has created and implemented lenient mortgage guidelines on FHA Loans than other mortgage loan programs.
  • This is because Lenders are insured by FHA in the event FHA Borrowers default on their FHA Loans.
  • FHA Loans are guaranteed against losses by the United States Federal Housing Administration in the event FHA Borrowers default.
  • FHA Lenders are able to offer FHA Loans to home buyers with 3.5% down payment and with less than perfect credit.

FHA Mortgage Rates Florida: What are the 2013 FHA mortgage loan guidelines?

FHA loan guidelines allow mortgage lenders to offer mortgage loan borrowers low down payments and lower credit scores than conventional mortgage loans.

  • The Federal Housing Administration insured mortgage loan program has help millions of families become homeowners since FHA was created by Congress in 1934.
  • The Federal Housing Administration is not a lender and does not originate mortgage loans.
  • FHA insures the mortgage loan to FHA approved mortgage lenders.
  • There are various FHA mortgage programs.
  • First time FHA mortgage loans.
  • FHA mortgage refinance loans
  • FHA streamline loans with no income verification, no credit scores, and no appraisal.
  • 85% LTV Cash-out FHA mortgage refinance loans.
  • FHA 203k Streamline Rehab Loans.
  • Full Standard FHA 203k Loans.
  • See if you qualify!

FHA Guidelines On Minimum Credit Scores

There are minimum credit score requirements to qualify for FHA Loans:

  • Most FHA mortgage lenders require a minimum credit score of 640 FICO.
  • However, this is not a FHA Requirement but rather a lender overlay on credit scores.
  • HUD Requires 580 FICO credit scores to qualify for FHA Loans with 3.5% down payment.
  • Most of our mortgage loan borrowers have credit scores below 600 FICO.
  • The lowest credit score that meets my wholesale lenders FHA mortgage loan guidelines is a FICO score of 580 for 3.5% down payment home purchase FHA Loans.
  • For mortgage loan borrowers whose credit scores fall between 500 and 580, the minimum down payment required is 10%.
  • Lower credit score borrowers with scores below 580 FICO  can still qualify with 10% down payment.
  • Borrowers with lower credit scores should contact us so we can assist in preparing to improve credit. 

Owner Occupant Versus Second Homes And Investment Properties

There are three government loan programs:

  1. FHA Loans
  2. VA Loans
  3. USDA Loans

All government loans needs to be owner occupant home loans. Second home and investment property mortgages are conventional loans and/or investment portfolio loans.

FHA mortgage loan guidelines require that the home needs to be an owner occupied home.

  • Second homes and investment homes do not qualify for FHA mortgages.
  • FHA mortgage loan guidelines require that the property be 1 to 4 unit residential properties, single family homes, town homes, condos, and/or manufactured homes.
  • As mentioned earlier, FHA mortgage loan guidelines require the borrower to put a down payment of 3.5% down payment.
  • Down payment can be gifted by family members.
  • Escrow accounts is mandatory on FHA insured mortgage loans.
  • The mortgage lender will collect taxes and insurance of home every month along with principal and interest payment and pay taxes and the insurance premium directly.

Other FHA Mortgage Loan Guidelines

Other FHA mortgage loan guidelines include that the FHA mortgage loan borrower have a two year employment history.

  • Recent college graduates who just landed a job can qualify for FHA Loans.
  • The time spend as a full time college student will be counted towards the two years employment history.
  • Lenders prefer that the job is similar to the field of study in school.
  • Most FHA insured mortgage lenders like to see a debt to income ratio of no greater than 43%.
  • Again, the 43% is a FHA Lender Overlay on DTI.
  • Maximum debt to income ratio allowed is 46.9% DTI Front End, 56.9% DTI back end.
  • Non-Occupant Borrowers are allowed with FHA Loans.

FHA Mortgage Insurance Premium

Mortgage Insurance Premium is mandatory with FHA Home Loans.

  • Upfront mortgage insurance premium of 1.75% of the mortgage loan amount is a one time cost and is added to the mortgage balance.
  • There is an annual mortgage insurance premium of 0.85% for the life of a 30 year fixed rate FHA Mortgage Loan.
  • Majority of FHA mortgage loan borrowers choose the 30 year fixed rate mortgage loan program
  • 15 year fixed rate mortgage loan programs are available as well.

If you have any questions on FHA insured mortgage loan programs, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Gustan Cho, NMLS ID 873293

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