FHA Loans


Why Are FHA Loans So Popular?

FHA Loans
Gustan Cho Associates

FHA Loans are by far the most popular residential mortgage loan programs today.  The United States Department of Housing and Urban Development, commonly known as HUD by many, is the parent of the Federal Housing Administration , which is FHA.  FHA is not a mortgage lender.  FHA is a governmental agency that insures mortgage loans to FHA approved mortgage lenders such as banks, credit unions, mortgage companies, and institutional lenders who are FHA approved mortgage lenders against default from FHA mortgage loan borrowers.  Since FHA insures FHA approved mortgage lenders against losses from foreclosures and default from FHA mortgage loan borrowers, mortgage lenders have less risk so mortgage loan borrowers of FHA insured mortgage loans have lower interest rates, and qualifying for a FHA loan requires minimal down payment, easy credit criteria, and it is easier to qualify for a FHA loan than any other mortgage loan program.

What Are FHA Loans And How Can FHA Loans Help Me?

FHA Loans are residential mortgage loans that is available to owner occupant home buyers only that is backed by the federal government.  FHA insures FHA approved mortgage loans to mortgage lenders who originate and fund FHA Loans as long as the loans follow FHA mortgage lending guidelines.  FHA Loans have minimal down payment requirement, 3.5% down payment on a home purchase, and extremely generous minimum credit requirements, 580 FICO minimum credit score to qualify for a 3.5% down payment home purchase mortgage loan.  Conventional mortgage loans require a minimum credit score of 620 FICO.  Debt to income ratio requirements are much more generous on FHA Loans than Conventional Loans as well.  Maximum debt to income ratio caps on conventional loans is 45% DTI.  With FHA Loans, the maximum back end debt to income ratio is capped at 56.9% DTI.

Basics On FHA Loans

As mentioned earlier, FHA does not fund the FHA Loan.  FHA has nothing to do with origination, funding, or servicing a mortgage loan.  FHA is a governmental agency whose purpose is to act as a federal mortgage insurance company that acts as the insurer of FHA Loans that is between a FHA mortgage loan borrower and the mortgage lender.  Bottom line is that FHA mandates and charges you both upfront mortgage insurance premium and annual FHA mortgage insurance premium to fund the FHA mortgage insurance fund so it can insure FHA Loans originated from FHA insured mortgage lenders against borrower’s default of FHA insured mortgage loans.

Low Down Payment Is Great Feature On FHA Loans

Down payment, closing costs, income, and credit are all important factors when qualifying for a mortgage loan. Living costs such as food prices and general living expenses and most  hard working Americans live paycheck to paycheck so saving for a down payment on a home purchase is rather difficult.  One of the biggest advantages to qualifying for FHA Loans is that it only requires 3.5% down payment on a home purchase and the down payment can be 100% gifted from a family member.  FHA allows up to a 6% sellers concessions towards a home buyers closing costs which can use for all costs associated with the closing on the home loan such as title charges, attorneys fees, recording fees, inspection fees, pre-paids, and buying down points to get a better mortgage rate.

Home Loan With Bad Credit: FHA Loans

Nobody ruins their credit on purpose.  Majority of consumers are financially responsible but there are extenuating circumstances in one’s lives where they may lose their business, lose their jobs, have medical issues, go through divorce, or other issues where their income streams gets interupted where they cannot pay their bills on time and due to that their credit gets ruined.

First time home buyers or veteran seasoned home buyers seeking a home loan with bad credit can now qualify for a FHA Loan.  One of the main goals FHA Loans were created was to help home buyers with prior bad credit, prior bankruptcy, prior foreclosure, prior short sale, prior deed in lieu of foreclosure get a second chance after re-estalishing their credit and give them the opportunity to become home owners.  FHA has also implemented the FHA Back to Work Extenuating Circumstances due to an Economic Event which shortens the waiting period to a one year waiting period after bankruptcy and foreclosure to home buyers who were out of work and due to the involuntary unemployment they were left no option to file for bankruptcy or had to initiate foreclosure, deed in lieu of foreclosure, or short sale.

Minimium credit scores to qualify for a 3.5% down payment home purchase is 580 FICO.  Home buyers with credit scores between 500 FICO and 579 FICO can qualify for a FHA loan, however, a 10% down payment is required along with compensating factors .

FHA Mortgage Lender With No Overlays

If you are a home buyer seeking a home loan with bad credit and need a FHA mortgage lender with no investor overlays, my team of licensed mortgage loan originators and I can help you.  Half of our mortgage loan borrowers were borrowers who could not get qualified by another mortgage lender due to the mortgage having mortgage lender overlays .  If you are seeking a home loan with bad credit, apply online now by clicking APPLY ONLINE NOW and complete the four page mortgage application. Once you submit your online mortgage application, I will get alerted and I can issue you a solid pre-approval after a brief 5 to 10 minute phone interview.  I am available 7 days a week, including evenings and holidays.

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