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If your credit is less than ideal and/or you have a low down payment amount available, consider a loan through the Federal Housing Assurance program.
The Federal Housing Assurance program is a government-backed program that allows borrowers to finance a home that they normally may not be able to qualify for through conventional means. This type of loan is a mortgage insured by the Federal Housing Administration (FHA).
While this is a popular choice for first time homebuyers, it’s not limited to them. This is a great option for those with less than 20% down or those who have lower credit scores due to financial hardship or bankruptcy, etc. (Bankruptcy requires a seasoning period, so check with your Loan Officer on those details.)
Unlike Conventional loans, FHA requires only 3.5% for the down payment – this makes it easier to buy a home faster than waiting years to save up.
The standard down payment is 20%, so to make up the difference, if you only put down 3.5% – then the other 16.5% is reached with MIP – private mortgage insurance. This is a small fee added on to the monthly payment that is paid until the LTV (Loan To Value) reaches the 80%. This does not always mean that you have to use the amortization schedule to meet your payment deadlines. If your home’s value has increased, after a couple years, you can contact your lender or servicer and with a few requirements such as getting a new appraisal you can request the MIP to fall off. This can take thousands off your final principal.
FHA Loan Features:
Not limited to first-time homebuyers
Fewer restrictions applied (less-than-perfect credit score option available)
As low as 3.5%-down payment Loan Limit $647,200* (County Limits Apply)
To the FHA, reliability includes holding a steady job for at least 2 years with the same employment, increasing or maintaining consistent income, and demonstrating a sufficient credit history.
Additionally, any foreclosure or bankruptcy on one’s record has to be at least three years old in order to be able to proceed with this loan program. *As per FHA.GOV
To the FHA, reliability includes holding a steady job for at least 2 years with the same employment, increasing or maintaining consistent income, and demonstrating a sufficient credit history. Additionally, any foreclosure or bankruptcy on one’s record has to be at least three years old in order to be able to proceed with this loan program.