If you are a first time home buyer then maybe the best loan for you might be an FHA loan.
- 3.5% down payment.
- Higher DTI (debt to income) ratios allowed as compared to conventional loans.
- Gifts allowed to qualify.
- Down payment programs tend to compliment the FHA loan.
- 580 FICO scores allowed with proper compensating factors.
When it comes to home loans FHA is the starting point for most people, reason being low down payment and better DTI allowances.
FHA Loans do have a mandatory “mortgage insurance” that is set by the Federal Housing Administration aka FHA click here to see them LINK.
Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development’s (HUD) Office of Housing in 1965. FHA set loan limits they can be seen HERE.
FHA insures loans given by lenders. For most people buying a home for the first time they are looking for lowest down payment possible and FHA allows you to buy your home with only 3.5% down. If you put 3.5% then the mandatory MI mortgage Insurance is .85% and is permanent . If you put 5% down then the mandatory MI is .80% and is permanent. If you put 10% down then the MI is .80 and will be removed after 11 years. Like with all loans, attention is given to the borrowers ability to pay the loan back and the risk to the lender. If there is very little “skin in the game” then the mortgage insurance will be higher protecting the lender, and conversely if there is more money put down then the lender has less risk so the mortgage insurance is less and the FHA allows the release of the MI if 10% is put down. FHA is a good starting loan and it should be known that FHA is for owner occupied properties only. Investment folks, we will cover your loan in the next segment. We are always trying to get you the Best Mortgage Rates Available
