FHA Loans

FHA Loans for First Time Home BuyersIf you are a first time home buyer looking to purchase your first home, FHA Loans are designed to help you with the process. Because this home loan program has low down payments, it may be less expensive for you to own instead of renting. Home ownership has many benefits, ranging from building equity to improve your financial future to tax deductions and establishing a potential new stream of income (should you choose to rent out space). If you are looking to buy your first home in Raleigh, Clayton NC or anywhere in North Carolina, contact Rob Yo The Mortgage Pro at (919) 322-8201 today!

What is a FHA Loan?

The Federal Housing Administration (FHA) was established in 1934, and was given the mission of improving the housing market by protecting lenders. Since its inception, the FHA has insured over 34 million mortgages nationwide, making it the largest insurer of mortgages in the entire world.

FHA Loans are insured by FHA. Because these home loans are insured by the government, it protects lenders from a loss if the borrower defaults on the loan, allowing lenders to offer FHA Loans at competitive interest rates and and more flexible qualification requirements. Typically borrowers can approved with a lower down payment of 3.5%, as opposed to the usual 20% required for other loan programs. Additionally, the down payment can be gifted from an acceptable gift donor.

The reason that FHA Loans are so popular with first-time home buyers is their relaxed credit requirements and low down payments. With a down payment of only 3.5% and credit score as low as 580, first time homeowners could potentially qualify for a FHA Loan.

Benefits of FHA Loans

There are many advantages to a FHA Loan. This type of home loan can be used for purchasing a new home, refinancing an existing mortgage, financing a special renovation project and even reverse mortgages. First time home buyers often find FHA Loans beneficial, but there are other FHA-insured mortgage programs with advantages as well. If you are seeking to refinance, there are both cash-out refinances and streamline refinances. Cash-out refinances are available to provide extra cash for expenses such as home repairs. If you are simply looking to lower your interest rates, FHA Streamline Refinances are a great loan option. Additional benefits of FHA Loans include:

  • Low down payment of 3.5% (compared to 20% for other options)
  • A higher debt to income ratio is allowed, with the limit currently set at 31% front-end and 43% back-end or lower
  • If the home doesn’t appraise, the borrower is able to receive their earnest money back, regardless of the due diligence period
  • Non-occupant co-signers are able to help with down payments, debt-ratio and credit
  • Borrowers can approved with a credit score as low as 580 (lower credit scores may be approved, but will have additional requirements)
  • FHA Loans can be used for a variety of property types, including single family homes, condominiums, townhomes, and manufactured homes
  • Multi-unit properties purchased with the intent of renting out units may qualify
  • FHA Loans have the shortest seasoning period required after having a prior bankruptcy, foreclosure, or short sale
  • This type of home loan is assumable when the borrower sells the property

FHA Loan Eligibility

Because this loan is insured by the federal government, eligibility requirements are more flexible than traditional mortgages. There are several conditions borrowers must meet to be eligible for a FHA Loan:

  • Credit scores as low as 580 are accepted. Credit scores between 500 and 579 may qualify in some cases, but will have additional requirements, including a down payment increased up to 10%
  • A debt-to-income ratio of 43% or less is required. In special circumstances, debt ratios as high as 50% may be approved, but will have additional requirements for the borrower
  • If credit score requirements are met, down payments as low as 3.5% are available
  • The property being purchased must meet specific safety, security, and structural integrity criteria, as defined by the FHA

The FHA requires all borrowers to pay two separate mortgage insurance payments (MIP) for FHA Loans. The FHA will automatically add an up-front premium of 1.75% of the home’s purchase to the loan balance. This increase to the total loan amount from the MIP additional does not affect the calculation of the loan-to-value (LTV) ratio. The second MIP is an annual premium that typically is between 0.70% and 1.05%. This MIP is calculated annually, but will be paid monthly. This annual MIP is based on factors such as the total loan amount, LTV ratio, and length of the mortgage.

FHA Loan Limits

Wake County
Johnston County
Guilford County
Mecklenburg County
New Hanover County
Durham County

For limits in other counties, visit the HUD website or contact Rob Yo The Mortgage Pro.

Get Pre-Qualified for a FHA Loan

If you are a first-time homebuyer, or simply seeking a low down payment mortgage in Raleigh, Clayton NC, Greensboro, Charlotte, Wilmington or anywhere in North Carolina, Rob Yo The Mortgage Pro can help you. Rob Yo The Mortgage Pro is committed to helping North Carolinians realize the dream of homeownership. For more information on FHA Loans, or to get started on the home loan process, contact us at (919) 322-8201 or fill out the form on this page.