Whether you’re a first-time buyer or you’ve done this before, purchasing a new home is always a complex process. Getting a mortgage can be particularly challenging given the costs, fees, and paperwork involved. If you have poor credit or don’t have the funds for a standard 20% down payment, then an FHA loan may be the right option for you. This website is designed to help you find the best FHA lenders. So, if you’re looking for an FHA loan in your state, keep reading.
FHA loans are home loans guaranteed by the U.S. Federal Housing Administration and serviced by qualified FHA mortgage lenders. FHA loans come in two forms: 3.5% down payment for borrowers with credit of 580-619, or 10% down payment for borrowers with 500-579 credit. Repayment terms range from 15 years to 30 years.
As a condition of receiving an FHA loan, borrowers must pay monthly private mortgage insurance (PMI). This involves an upfront payment of 1.75% of the loan amount, plus an annual premium ranging from 0.45% to 0.85% of the loan amount.
To get your FHA loan application approved, you’ll need to provide personal and financial information including your social security number, recent pay stubs, tax returns, bank statements, and proof of other sources of income. Your FHA lender will then perform a hard credit check before deciding whether to preapprove you for a loan.
Other FHA loan requirements include
Standard FHA loans have fixed rates. When you take a fixed-rate FHA loan, you pay more in year one than you would with an adjustable-rate mortgage. However, you protect yourself from the risk of higher interest rates and higher monthly payments later in life. Given that interest rates are still hovering near historical lows in 2022, the only direction that rates can realistically go from here is upward–which is why locking in a fixed-rate mortgage is currently a better option than betting on an adjustable-rate.
The FHA Section 251 Adjustable Rate Mortgage program is an alternative FHA loan with adjustable rates. The conditions are slightly different to those for a fixed loan, so make sure to speak to your lender when filing an FHA loan application.
The most common form of mortgage is a conventional mortgage, also known as a conforming loan. This type of home loans involves two parties: the borrower (you) and the lender. Most lenders require at least a 20% down payment on a conventional mortgage. However, an increasing number of lenders are offering mortgage preapproval with just a 3% down payment requirement.
Jumbo loans are loans that exceed the legal conforming loan limits set by the Federal Housing Finance Agency (FHFA). Because jumbo loans involve more money and therefore greater risk to mortgage companies, they typically have stricter qualifying requirements. In 2022, the conforming loan limit is $647,200 in most U.S. counties and as much as $970,800 in high-cost areas such as the greater New York, Washington, D.C., San Francisco, and Los Angeles areas.
VA loans are a government-backed loan administered by the Department of Veteran Affairs. The minimum credit requirement for a VA loan is usually 620+, the same as a conventional loan, but the big prize is the zero down payment requirement. The following people may apply for a VA loan: veterans who have served at least 90 consecutive days of active service in wartime or 181 days of active service in peacetime; members of the National Guard and Reserve who have served at least 6 years; and spouses of veterans who died in the line of duty or as a consequence of a service-related injury.
Like other government-backed loans, lenders may only offer USDA loans to borrowers who meet the qualifying requirements – in this case, the main requirement is purchasing in a rural or semi-rural area. USDA mortgages require no down payment but do require monthly PMI until you reach 20% equity.
The monthly payments on a mortgage comprise principal, as in the amount remaining on your loan, and interest, as in the money the lender collects for providing the loan. Your APR, or annual percentage rate, consists of the interest rate plus certain other lender fees. The lower the interest rate / APR, the lower your monthly payments to the lender.
The repayment term, or loan duration, is another important factor when comparing FHA mortgage lenders. The typical repayment term is 15-30 years. There is no right or wrong when it comes to repayment terms; what’s best for you depends largely on how much you can afford to pay each month. The shorter the term, the higher your monthly payments but the less you’ll pay in interest over the life of the loan. The longer the term, the lower your monthly payments but the more you’ll pay your lender in the long run.
Gone are the days when you had to walk into a physical branch to get preapproved for an FHA loan. These days lenders let you apply for an FHA loan online, sometimes through a fully automated online mortgage platform and other times with phone assistance from a loan agent. If convenience is important to you, then keep an eye out for digital-friendly lenders.
suspicious of lenders that hide or make it difficult to find important information.