FHA Loans Offer Home Buyers Multiple Benefits
November 2nd, 2017
November 2nd, 2017
With all the various mortgage loan options that home buyers can choose from, loans backed by the Federal Housing Administration (FHA) are some of the highest in demand. In fact, about 1 in 5 borrowers use an FHA loan to finance a home purchase.
Why are FHA loans so popular? This video explains some reasons why home buyers are choosing to get FHA loans.
Besides great low rates, low down payments as small as 3.5%, and closing options within 30 days or less, here are some other benefits you can receive with FHA loans.
While you may not think of FHA mortgage insurance premiums as a benefit, this insurance is what allows lenders to issue FHA loans to home buyers at low rates and for very small down payments. It also protects the lender in case you were to default on your loan. The good news is, FHA MIP rates have dropped since 2014. And there are ways you to reduce your FHA MIP annually, such as getting a 15-year mortgage term for your loan, or making a down payment of at least 5 percent. Or, you can eventually refinance your loan out of a FHA MIP.
You can use gift funds from relatives, an employer, an approved charitable group, or a government homebuyer program, to pay your entire 3.5% down payment. However, you will need to follow the gift fund process. If you’re not sure what that entails, talk to one of the mortgage experts at Grandview Lending in Indianapolis.
Your debt-to-income ratio (DTI) compares how much you owe monthly to how much you earn. It’s basically the percentage of your monthly income (before taxes) that goes to pay your rent, mortgage, credit cards, and other debt. The current (2015) limits for FHA DTI are 31% for monthly housing payments and 43% for total debt. However, there are exceptions if you’re slightly above those numbers. Just talk to your Grandview Lending mortgage specialist to see if you qualify.
Different lenders have different rules regarding minimum credit scores. In a recent report, the average credit score for completed Fannie Mae and Freddie Mac home loans were 754. However, this same report showed that the average FICO for closed FHA loans was about 60 points lower at 686. Generally, FHA loan requirements allow for lower credit scores – about 37% of FHA approvals fell in the 650-699 credit score range while 24% of applicants were in the 600-649 range.
As a mortgage broker firm, Grandview Lending can help you shop around for the right FHA loan, so you’re not confined to the FHA loan products offered by your bank or another mortgage lender. We have access to many different lenders. Plus, because different lenders use different underwriting methods, if you’re declined by one lender, you could be approved by another.
If you’re ready to take a look at FHA mortgage loans, contact Grandview Lending. We offer several types of FHA loan products like fixed rate, adjustable rate, construction loan, renovation loan, and refinance products. Call us today at 317.255.0062 for a pre-consultation session to learn how you can do FHA the right way.
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