Considering a Utah FHA mortgage? You have plenty of company. The Federal Housing Administration, also known as FHA, is the largest insurer of mortgage loans in the world.
Understanding how an FHA loan works and how they can benefit you is important.
What is an FHA Loan?
FHA, which is part of the U.S. Department of Housing and Urban Development, also known as HUD, doesn’t actually provide home loans. It collects mortgage insurance premiums on loans made by mortgage lenders. The insurance premiums are paid by adding an upfront mortgage insurance premium to your loan and charging you an annual premium paid as part of your monthly payment. Since it was created in 1934, FHA has insured more than 47 million home loans. Mortgage insurance helps protect Utah mortgage companies against losses in the event borrowers default on their loans.
FHA mortgage insurance makes it so mortgage lenders are able to offer loans that require less of a down payment. Easier qualifying criteria than they otherwise would be able to offer, and often FHA interest rates are better than conventional loans. The insurance helps offset the higher risk of default on FHA mortgages with lower down payment requirements and are easier to qualify for. This makes it easier to refinance an existing loan or to buy a home and with less cash.
Once primarily a loan program for first-time homebuyers, FHA today helps all kinds of homebuyers and their families afford a home of their own. And remember, it is always a good idea to get pre-approved from a mortgage broker before shopping for your new home. Call us today to pre-qualify for an FHA loan.
Easier to Qualify: FHA loans are available for people with credit scores of 580 or higher and down payments as low as 3.5%. This makes FHA loans more accessible than other mortgages.
Low Down Payment: FHA loans only require a 3.5% down payment, this makes it easier to buy a new home. Additionally, the 3.5% can be given to you by a family member in the form of a gift, unlike many other loan programs that require you to have your own down payment.
Low Credit Score Requirements: Because FHA loans are backed by HUD and the U.S. government, those with a less than perfect credit or lower credit scores have an easier time getting this kind of loan.
Better Interest Rates: FHA loans typically offer lower mortgage rates than most traditional conventional mortgages that are available, this will result in lower monthly payments.
Fixed or ARM Rates: They are available with fixed or adjustable rates and for 30-year or 15-year terms.
Bankruptcy or Foreclosure: You could still qualify for an FHA loan if you’ve had a bankruptcy, foreclosure, or other financial issues in the past.
Closing Costs: Loan costs can be rolled into your loan so that you do not need any funds upfront or at closing.
FHA Streamline Refinance: If already have an FHA loan, you can refinance with an FHA Streamline. Less documentation is required for this option, and you may not need an appraisal. The FHA Streamline is a good option if you’re not looking to take cash out.
Cash-Out Refinance: An FHA cash-out refinance allows you to use up to 85% of the equity for just about any reason. This is typically a higher amount than most conventional loans.
Qualifying for a home mortgage loan can be difficult, an FHA mortgage loan can make the process easier. There are fewer restrictions for an FHA loan qualification in comparison to a standard conventional mortgage loan. Basic qualifications for a Utah FHA mortgage are:
Employment: Proof of employment status for at least two years, employment does not need to be consecutive. Schooling may qualify as work history.
Credit Scores: Minimum of 580 FICO score with higher than a 90% loan-to-value (LTV), a minimum of 500 FICO score with less than a 90% loan-to-value.
Bankruptcy: Must wait a minimum of two years after declaring a chapter 7 bankruptcy. A minimum of one year after filing a chapter 13 bankruptcy. Payments must be made on time after bankruptcy is declared.
Foreclosure: A three-year waiting period is required after a foreclosure or short-sale.
Down Payment: You must pay a minimum of a 3.5% down payment.
Occupancy: The property must be your primary residence. Investment properties and second homes don’t qualify for FHA loans. You will need to move in within 60 days of closing.
Property Condition: The home must meet the FHA’s minimum property standards for safety, security, and structural integrity.
Since 1994, Advanced Funding Home Mortgage Loans has been a leader in providing quality Salt Lake City mortgages and is one of the top mortgage companies in Utah. We specialize in only residential loans, making your mortgage our priority.