June 16, 2019
Know Your FHA Home Loan Limits
All housing markets are subject to variations, and not all of them have the same costs or median house prices. And not all housing types are available in a given market. The home in California averaging at one price range won’t be the same as a housing market in a less expensive area.
FHA home loan limits for high-cost and low-cost areas are adjusted rather than featuring an one-size-fits-all approach, and those limits are adjusted annually. You should always check the current loan limits before committing to a new home loan to see what you can expect in your chosen market.
FHA Loans May Be Available With Adjustable Mortgage Rates and You Can Always Choose A Fixed Rate Loan Instead
The fixed-rate FHA mortgage is a great option for first-time home buyers, but an adjustable rate loan may be available if the participating FHA lender offers it. Who should choose adjustable rate mortgages?
Those not planning on staying in their home for the full duration of the loan term should explore this option to see if there are any advantages there based on current financial goals.
Buying a home with a strategy to sell it later on before the loan term ends may include taking advantage of the lower introductory interest rates on an ARM loan and selling or refinancing before the rates are adjusted beyond the point the borrower is comfortable paying.
FHA Loan Down Payment Requirements-How They Measure Up To Conventional Mortgage Loan Requirements
FHA loans require a minimum down payment of 3.5% of the adjusted value of the home. This requirement can go as high as 10% (depending on the borrower’s credit rating and other factors) and your lender will explain what conditions require the higher down payment.
Conventional Mortgages may require as much as 20% down, or may require 20% down to avoid having to invest in private mortgage insurance.
FHA Loan Credit Requirements: Compare Them To Conventional Mortgages
FHA home loans (and also FHA refinance loans) are backed by the government which means your participating FHA lender may be more forgiving when it comes to credit scores. Remember that FHA FICO score rules and lender standards are not identical-the lender is free to require standards more strict than the FHA regulations.
FHA loan rules include provisions that make a borrower is technically eligible for an FHA mortgage if they have FICO scores of 500 to 579 (with 10% down) and FICO scores of 580 or better getting the lowest down payment requirement (3.5%).
Lender standards may be higher than this. You will need to ask the lender what is acceptable at that financial institution, but know that no lender standards for an FHA mortgage can be LOWER than FHA guidelines.
FHA Loans Allow Certain Seller-Paid Closing Costs
Sellers can contribute toward approved FHA loan closing costs up to a six percent cap of the sales price of the home. Lender requirements and state law may affect how this is done, and you will have to negotiate with the seller as this is NOT a requirement, but an option you can use as a bargaining tool.
FHA Loans Are Available To All Financially Qualified Borrowers
You do not have to be a first-time home buyer to qualify for an FHA mortgage loan, and there is no need-based restriction on FHA mortgages. Any financially qualified borrower who wants to buy a home as an owner/occupier can apply for an FHA mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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