All You Need To Know About A Texas FHA Loan
An FHA loan is basically a mortgage that’s been insured by the Federal Housing Administration. It allows down payments for as low as 3.5% with a 580 FICO. If you are a buyer with lower credit scores or limited savings, you should consider applying for FHA loans.
Regardless if you’re sure that an FHA loan is perfectly suited for you or you want to know what the FHA is, here’s a breakdown of all you need to know. You don’t need to delve into the FHA handbook for answers; find all the answers to FHA FAQs right here.
This is a mortgage that has been insured by the Federal Housing Administration. Borrowers with a credit score of 580 or more are eligible to get a minimum of 3.5% down payment. FHA loans are sought-after by first-time buyers with credit issues or little savings.
The FHA insures mortgages given by lenders such as credit unions, banks, and nonbanks. Upon default of the said loan, that insurance is in place to protect lenders. This is why FHA lenders are more than eager to provide favorable terms to borrowers who may be eligible for a home loan.
What Is The FHA?
The FHA, or as popularly referred to, The Federal Housing Administration, has been part and parcel of the U.S. Department of Housing and Urban Development since 1965. However, the FHA was founded over 30 years before that, as part of the New Deal.
In addition to the Dust Bowl drought and stock market crash, the Great Depression was marked by the housing market collapse. By the start of 1933, an estimated half of U.S. homeowners had defaulted their mortgages.
The FHA was founded under the National Housing Act of 1934 to cut foreclosures and make homeownership affordable. It put in place the 20% down payment as a new practice, insuring mortgages for up to 80% of a house’s value – in the past, homeowners were limited to borrow up to 50-60%.
What Are The Differences Between A Conventional Loan & FHA Loan?
- Compared to Conventional Loans, FHA loans permit lower credit scores and, in some circumstances, low monthly mortgage insurance payments.
- FHA loans may have closing costs not required by conventional loans
- FHA regulations are more open-minded when it comes to gifts of down payment cash from employers, family, or charitable organizations.
Various Types Of FHA Loans?
The FHA provides various loan options, from relatively standard purchase loans to products specially made to meet highly specific needs. Here’s a look at FHA loans used to purchase a house:
Common FHA Purchase Loans
Basic Home Mortgage Loan 203(b)
- Fixed not adjustable rates.
- Various types of houses are eligible.
203(k) Rehab Mortgage
- Renovation and Finances purchase with a single loan.
- Buy and refi choices are available.
Construction to Permanent (CP) Loan
- Finances the construction of a house together with the land on which it will be built.
Title I Properly Improvement Loan
- Used for repairing an existing house or buy a manufactured home.
- Funds energy-efficient upgrades during a refinance or home purchase.
- Available for existing or new homes.
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