What is an FHA Loan?
If you’re unsure if you might qualify for a mortgage, an FHA loan may be your solution. An FHA loan is a home mortgage that allows for a purchase of a primary residence with a low down payment and is insured by the Federal Housing Administration. Refinancing is also available. FHA loans help families become homeowners by lowering the cost of financing and the down payment barrier to buying. Several refinancing options are also available.
What Are the Benefits of FHA Loans?
Less-than-perfect credit can be considered. FHA allows for people with a credit score of 580 or higher to potentially obtain financing. Borrowers who do not have FICO scores and can provide acceptable alternative credit have the possibility of qualifying. FHA has shorter waiting periods than conventional loans for borrowers who have had credit events, such as a bankruptcy, foreclosure or a short sale as long as they have re-established credit. FHA allows a relative(s) to be a non-occupant co-borrower(s) to assist the borrower in qualifying.
Down payment requirements can be low. FHA’s minimum down payment can be as little as 3.5% on most types of properties. These mortgages are insured by FHA which allows borrowers to finance approximately 96.5% (excluding mortgage insurance) of the value of their home purchase in many cases.
Borrowers can make the down payment with a gift. The down payment can be 100% gift funds from a family member or in some cases a charitable organization. This is one of the key benefits to an FHA program. Verification of the source of gift money is required, and cash gifts are not allowed.
FHA Streamline Refinance Loan
FHA has streamline refinance loans that cut down on the amount of documentation required from the borrower and the underwriting that needs to be performed by On Q Financial.
The basic requirements of a streamline refinance are:
- The mortgage to be refinanced must already be FHA-insured
- The mortgage to be refinanced should be current (not delinquent)
- The refinance is to lower the borrower’s monthly principal and interest payments
- No cash may be taken out on mortgages refinanced using the streamline refinance process
- No appraisal no credit qualifying is available
Whether you’re looking to purchase or refinance a home using an FHA loan, an On Q Mortgage Consultant can help you achieve your financial goals.