At Stanford Mortgage, we understand navigating the world of home loans can be overwhelming, especially for first-time homebuyers. As a result, that’s why we will be right by your side to help you understand the different types of loans available, including the FHA Home Loan.
What is an FHA Loan?
So what exactly are FHA Loans? FHA stands for Federal Housing Administration, a government agency that insures mortgages. FHA Loans help people who may not qualify for conventional loans, such as those with lower credit scores or less cash for a down payment.
What are the best benefits of an FHA Loan?
One of the most significant benefits of an FHA Home Loan is the minimum down payment requirement. With an FHA loan, you can use as little as 3.5% of the home’s purchase price with an FHA Loan. The lesser down payment can be a massive advantage for those with small cash to put towards a down payment.
Another benefit of FHA Loans is that they are more forgiving of lower credit scores. While most conventional loans require a credit score of at least 620, FHA Loans may be available to borrowers with lower credit scores, as low as 500. Now that being the case, remember that the lower your credit score, the higher the interest rate may be.
What is the FHA Mortgage Insurance Premium?
FHA Loans also have some unique requirements that borrowers should be aware of. As an example, the home you’re purchasing must meet specific physical standards set by HUD. In addition to physical stantards of the home, you’ll be responsible for paying the FHA mortgage insurance premium for the duration of the loan. These premiums can add to your monthly mortgage payment, so factoring them into your budget is essential.
What income and asset documentation is required for an FHA Home Loan?
Borrowers are typically required to provide a variety of documentation to the lender. These key documents include:
Proof of income: This could include pay stubs, W-2 forms, or tax returns for the past two years. Additional documentation, such as profit and loss statements, may be required if the borrower is self-employed.
Proof of employment: Lenders will typically request a verification of employment form from the borrower’s employer, which confirms their current job status and income.
Bank statements: Borrowers will typically need to provide recent bank statements to show their cash reserves and ability to make mortgage payments.
What other documentation is required for an FHA Home Loan?
Identification documents: Borrowers must typically provide a valid government-issued ID, such as a driver’s license or passport.
Credit reports: Lenders will obtain a credit report from one or more credit bureaus to assess the borrower’s creditworthiness.
Other documentation: Additional documents may be required depending on the borrower’s situation. For example, if the borrower has had a bankruptcy or foreclosure in the past, documentation related to those events might be requested.
How to get an FHA Home Loan?
At Stanford Mortgage, we believe that FHA Loans are an excellent option for many homebuyers who may not qualify for conventional loans. However, we also understand that every borrower’s situation is unique. As a result, we’ll provide you with personalized guidance. Stanford Mortgage is ready to help you achieve your dreams of homeownership.
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**Stanford Mortgage is not affiliated with or acting on behalf of or at the direction of HUD, FHA, VA, USDA or the Federal Government.
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