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Am I eligible for an FHA loan?

At the Better Rate Mortgage, we have experience helping out first-time buyers with FHA loans. Contact us now at (314) 361-9979 to get your homeownership journey started.

If you’re thinking about buying a house for the first time, you may have heard of FHA loans. FHA loans are popular with first-time homeowners because they often require lower credit scores and down payments than other loans. This article will explain how FHA loans work and if they may be a fit for you.

Why do people get FHA loans?

“FHA” stands for “Federal Housing Administration.” FHA loans are government-backed mortgages that come in 15 and 30-year terms with fixed interest rates. FHA loans can be easier to get for new homeowners who may not have a solid credit score. However, they have a few features regular loans don’t.

FHA Mortgage Insurance Premiums

Typically, mortgage insurance is required if the down payment made is less than 20%. With FHA loans, it’s required regardless, and there are two different mortgage insurance premiums. There’s an upfront mortgage insurance premium you would pay when you get the loan. And there’s an annual mortgage insurance premium. These premiums protect the lending body if you default on your mortgage. FHA mortgage insurance premiums can potentially be canceled after 11 years if you have financed 90% or less of the property value and stayed current with your payments.

The down payment required can vary depending on your credit score. With a FICO score of 500-579, you might have to put 10% down. However, if your score is over 580, you might need to put only 3.5% down. The FHA will accept a smaller down payment if they judge you to be more reliable.

You will also have to provide past employment history for the previous two years, as well as proof of your current income. The FHA might ask to see bank stubs or W-2s. The loan must also be for a primary residence. There are a few other factors the FHA considers – FHA loans can be a complex topic.

Differences Between FHA and Regular Loans

There are a few other differences between FHA loans and regular loans. Conventional loans usually look for a higher credit score than FHA loans. FHA loans only come in 15 or 30-year terms – a normal loan could come in 10, 15, 20, or 30-year terms. You may also be able to get a variable interest rate with a normal loan. That won’t be an option with an FHA loan.

Specialty FHA Loans

The FHA also offers specialty loans for unique situations. These include FHA 203(k) loans, HECM loans, EEM loans, and section 245(a) loans. An experienced residential lender can discuss all options with you and help you find the best loan for your situation.

At Better Rate Mortgage, we have experience helping out first-time buyers with FHA loans. Contact us now to get your homeownership journey started.

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