Monday, December 2, 2013 - Article by: Prospect Financial Group, Inc. -
The FHA loan program is a great program for consumers that are not able to come up with much of a down payment for their home purchase. In fact, with an FHA loan you can qualify for a mortgage with as little as 3.5 percent down. FHA loans are also a great option for home buyers that have less-than-perfect credit.
FHA loans are loans that are backed by the government. Specifically, the Federal Housing Administration (FHA). The FHA does not provide the funds for the loan, but they do provide insurance against the loan. So in the case that the borrower defaults on their loan, the lender will be protected by the insurance provided by the FHA. Because of the FHA's insurance, lenders are more confident to lend to borrowers with a lower down payment or poorer credit score under the FHA loan program.
In order to qualify for an FHA loan, you must be a legal U.S. resident and have a minimum of two years steady employment history. Your monthly housing costs, which include principal and interest payments, monthly mortgage insurance and property taxes, also must be less than 31 percent of your pre-tax income. On top of that, those housing costs combined with all other debt payments must total less than 43 percent of your pre-tax income. Generally you must have a credit score of at least 640 to be approved.
If you are purchasing your first home, it is important to explore your options. Consider all of the different loan programs available to you, including conventional and FHA loans. At Prospect Financial Group, Inc. our loan experts can help you explore your options to determine what the best loan is for you. Call us today at 858-605-0952.
Didn't find the answer you wanted? Ask one of your own.