FHA Home Loans – A low down payment option.
FHA Home Loans: One of the biggest hurdles that first-time homebuyers face is saving up for a sizeable down payment on a home.
An FHA loan provides a government-insured loan with flexible loan options. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.
What is an FHA Home loan?
The FHA loan is designed to help low- to moderate-income families attain homeownership.
FHA loans are mortgages insured by the U.S. Federal Housing Administration. Premier Home Financing provides FHA funding for home purchases with a lower down payment. Buyers may qualify for a home mortgage with as little as 3.5% down.
FHA Loan Requirements
Lenders will evaluate your qualifications for an FHA loan as any potential lender will want to see:
- employment history
- debt-to-income ratio
- Lawful US residence
- Min 3.5% Down Payment
- Credit History as low as 500 FICO
- Used for primary residence only
Credit Scores and Down Payments
For an FHA-guaranteed loan, your financial history will be examined when you apply for a mortgage. A lender will look at your employment history for the past two years as well as your payment history for bills such as utility and rent payments. Potential borrowers with bankruptcy For an FHA-guaranteed loan, your financial history will be examined when you apply for a mortgage. A lender will look at your employment history for the past two years as well as your payment history for bills such as utility and rent payments. Potential borrowers with bankruptcy or foreclosure may have to wait at least 2 years until they can re-apply for an FHA loan, and after a foreclosure may be after 3 years.
Keep in mind that the lower your credit score and down payment, the higher the interest rate you’ll be paying on your mortgage
FHA Qualification Ratios
- Front End Ratios: monthly mortgage payment, HOA fees, property taxes, mortgage insurance, and homeowner insurance should be less than 31% of your monthly gross Income.
- Back End Ratios: mortgage payment and all other monthly consumer debts, should be less than 43% of your gross monthly income.
- Back End ratios might get an exception at the underwriter’s discretion with strong compensatory factors.
FHA Mortgage Insurance Premium (MIP)
An FHA loan requires that borrowers are require to pay two types of mortgage insurance premiums:
An upfront MIP. In 2022, the upfront MIP is equal to 1.75% of the base loan amount, borrowers can either pay the upfront MIP at the time of closing, or it can be rolled into the loan for the duration of the loan. EX: $100,000 loan amount X 1.75%= $1,750.
Annual MIP, which is paid monthly, with the payments ranging from 0.45% to 1.05% of the base loan amount. The percentage is based on the Terms of the loan: length, and the original loan to value (difference between the purchase price and the borrowed loan amount) EX: $100,000 loan amount X 0.85%=$850 per year/12 months=$70/mo
MIP payments are Tax deductible and are deposited into an Escrow account held in trust by the servicer of the loan. In case of default, the funds will go toward the mortgage repayment
How Long I will be obligated to pay MIP?
| How Long You Will Pay the Annual Mortgage Insurance Premium (MIP) | ||
|---|---|---|
| TERM | LTV% | HOW LONG YOU PAY THE ANNUAL MIP |
| ≤ 15 years | ≤ 78% | 11 years |
| ≤ 15 years | 78.01% to 90% | 11 years |
| ≤ 15 years | > 90% | Loan term |
| > 15 years | ≤ 90% | 11 years |
| > 15 years | > 90% | Loan term |
When should I Stop Paying my FHA Mortgage Insurance Premium?
FHA mortgage insurance lasts for the life of the loan or for 11 years.
Own at least 20% equity in the home or to refinance the mortgage with a non-FHA loan.
FHA Loan Limits
| 2022 FHA Loan Limits | |||
|---|---|---|---|
| PROPERTY TYPE | LOW-COST AREA ‘FLOOR’ | HIGH-COST AREA ‘CEILING’ | SPECIAL EXCEPTION AREAS |
| One-Unit | $420,680 | $970,800 | $1,456,200 |
| Two-Unit | $538,650 | $1,243,050 | $1,864,575 |
| Three-Unit | $651,050 | $1,502,475 | $2,253,700 |
| Four-Unit | $809,150 | $1,867,275 | $2,800,900 |
U.S. Department of Housing and Urban Development
Have questions?
How Do I Apply for an FHA Loan?
You can apply for pre-approval of an FHA loan with the lender you choose
Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**Premier Home Financing is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.
