FHA loans are a perfect way for homeowners-to-be to save money on down payment and benefit from affordable housing opportunities along with lower initial interest rate.
Such loans are attractive for home buyers due to their flexible conditions.
FHA mortgage loans are insured by the federal government and, they have less strict credit requirements, compared to the other kinds of mortgages. To be qualified for the FHA loan program your minimum credit score should be 620.
Read more about Where Can I get an FHA Home Loan with Bad Credit?
It’s important to determine the exact amount of money you can spend. It’s called «housing ratio» and it is based on the part of your gross income, which you can put toward your regular mortgage payment.
Generally, your home loan payment cannot be more than 28% of your monthly income. Such ratio can rise up to 30% with an FHA mortgage loan.
The minimum down payment requirement on FHA mortgage is 3.5% of the house sales price.
The FHA loan also requires your house to undergo a special inspection process accomplished by an FHA-approved appraiser.
Another step would be to pay two kinds of mortgage insurance premiums such as Upfront Mortgage Insurance Premium (MIP) (about 1.75% of the loan) and the Annual MIP, integrated into your monthly payments based on the size of your loan, its period and loan-to-value ratio.
When applying for an FHA loan, you must choose your type of mortgage and carefully study all the necessary options. It’s important to apply for the most suitable program that meets your very needs.
Find our article Are FHA Loans Only for the First-Time Home Buyers, to know more about FHA mortgage types.