Looking to buy a home, but don’t have the cash to put 20% down? Is your credit less than perfect? An FHA loan may be just the solution to help you buy your new loan. Let’s explore the benefits of an FHA loan.
On Q Financial offers credit scores as low as 580 to potentially obtain. FHA’s minimum down payment can be as little as 3.5% on most types of properties. 100% of the down payment can be a gift funded by various parties such as the home buyer’s family member, employer or labor union, a charitable organization, and more.
Contact an On Q Financial Mortgage Consultant today to find out if an FHA loan is right for you.
See if an FHA loan is right for you
What is a Federal Housing Administration (FHA) loan?
An FHA (Federal Housing Administration) loan is a solution for buyers that might not otherwise qualify for a conventional mortgage. An FHA loan is a mortgage that allows for a purchase of a primary residence with a low down payment and is insured by the Federal Housing Administration (FHA). FHA loans help families become home owners by lowering the cost of financing and the down payment barrier to buying. According to Mortgage Reports, approximately 20% of qualified home buyers apply and get an FHA loan due to its credit and income friendly requirements.
History of FHA Loans
The Federal Housing Administration or FHA was created by Congress in 1934 and became a part of the Department of Housing and Urban Development (HUD) in 1965. At the time the FHA was created, the housing industry was slow. Approximately 2 million construction workers were out of jobs, mortgage qualifications were hard to meet for potential home buyers, and only 2 in 5 families actually owned their homes.
FHA loan programs helped to change this during the 1940’s and helped finance housing for veterans and military returning from service. In the three decades after, the FHA helped production on millions of housing units for lower-income Americans. Ever since, FHA loans have been one of the most sought after loan programs for families with a higher debt-to-income ratio and a lower income.
What are the eligibility requirements for an FHA loan?
FHA loans are great for first time home buyers because they accommodate lower credit scores and lower down payment amounts. Check out some of the qualifications for an FHA loan below.
At least a FICO credit score of 580 or higher
5% down payment
No reserves required with an Automated Underwriting approval on 1 to 2 unit properties
What are the benefits to an FHA loan?
An FHA loan is a great option for a first time home buyer that doesn’t have a great credit score or a lot of money to put down. 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.
FHA Loan Limits
At the beginning of each year, FHA loan limits are updated by HUD. The standard loan limits increased up to $314,827 from $294,515 in 2018. FHA loan limits may fluctuate based on your city, region, or state. Click here to see if limits could be different in your area.
|Purchase Price||Down Payment||Max Loan|
|Purchase Price||Down Payment||Max Loan|
How does an FHA loan compare to other loan types?
FHA loans and Conventional loans are different in many ways. Credit score requirements are higher for conventional loans. Down payment amounts vary for conventional loans as well. Take a look at the chart below for major differences in an FHA loan and Conventional loan.
Minimum Credit Score
|620||620||600 with AUS approval|
|From 3% to 20%||0%||
15 or 30 years
|10, 15, 20, or 30 years||30 years||15 or 30 years|
|Required w/o 20% down
|Who Can Qualify?||Available to all||Available to all||Approved Rural Areas Only||
FHA loans vs Conventional loans vs USDA loans vs VA loans
What credit score do I need for an FHA loan?
FHA loans allow people with a credit score of 580 or higher to potentially obtain financing. Potential home buyers who don’t have FICO scores and can provide acceptable non-traditional credit may be considered to qualify. However, you can always continue to improve your credit score.
How much of a down payment does an FHA loan require?
FHA’s minimum down payment can be as little as 3.5% on purchases. These mortgages are insured by FHA. This is a great option for first time home buyers or families that don’t have a lot to put down for their home.
Can I use gift funds for an FHA loan?
The down payment for an FHA loan can be 100% gift funds from a family member, employer, charitable organization and more! This is one of the key benefits of an FHA program. Verification of the source of gift money is required from the donor’s account and cash gifts are not allowed.
Down Payment Assistance for FHA Loans
Down Payment Assistance is available on most FHA loans. Down Payment Assistance Programs can help cover the down payment and/or closing costs for qualified home buyers. For qualified home buyers, an FHA loan only requires 3.5% in some cases. Talk to your local On Q Mortgage Consultant for more information if Down Payment Assistance programs would work for you and your FHA loan.
Closing Costs for FHA Loans
There are fees and charges that you accumulate in the mortgage process with an FHA loan or any loan and these fees are closing costs. FHA closing costs are approximately 3-4% of the home’s purchase price and that can vary by state due to higher taxes. Some Down Payment Assistance programs can cover a portion of the closing costs associated with your FHA loan.
Mortgage Insurance and FHA Loans
All FHA loans require mortgage insurance. The first premium charged is an upfront one-time payment mortgage insurance premium that is financed into the loan amount and usually totals around 1.75% of the loan. The second is an annual mortgage insurance premium (MIP), which is paid monthly, and there are a few factors that determine the rate including the loan-to-value ratio. The MIP is divided into 12 installments and are part of your monthly mortgage payments. Check out our Loan Calculator below for the monthly breakdown of your mortgage with an FHA loan.
FHA Loans for First Time Home Buyers
FHA loans can be a great solution for First Time Home Buyers with lower credit scores and down payment options as low as 3.5%. On Q Financial offers our On Time Closing Guarantee, Simplicity mobile app with our technology, On Time Closing Guarantee, Multicultural Advantage, and more to help qualifying home buyers achieve their dreams of home ownership. Talk to your local On Q Mortgage Consultant to get started.
FHA Loans for Realtors
On Q Financial works with your clients to find the best loan programs to match their needs and ensure that we’ll close on time.
We offer products and services to make sure your clients have the simplest mortgage experience with our Simplicity mobile app, On Time Closing Guarantee, Multicultural Advantage, and more.
FHA Streamline Refinance Loan
FHA Streamline Refinance Loans cut down on the amount of documentation required from the borrower and the underwriting that needs to be performed because it doesn’t require employment or income verification. Some of the basic requirements include:
The mortgage to be refinanced must already be FHA-insured
The mortgage should be current
The refinance is to lower the borrower’s interest and payments
No cash may be taken out on mortgages refinanced using the streamline refinance process
No appraisal no credit qualifying is available
FHA 203(k) Loan
The FHA 203(k) Loan is a type of loan that includes the renovation and mortgage loan. This loan can be used for updating or adding rooms or for older homes that need significant repairs. Some requirements include:
3.5% down payment
640 minimum credit score to qualify
2 years of tax returns
Verification of income
No late payments in the past 12 months
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.
See if an FHA loan is right for you
FHA Loan Calculator
Use our free mortgage payment calculator to see your potential monthly mortgage payments.
Buying a home is a big investment, it’s important to understand everything involved and see how much you can afford.
Estimate your Monthly Payments
Principle & Interest
This calculator provides a broad look at your monthly mortgage payments. To get a personalized quote from an On Q Mortgage Consultant, call 1-866-667-3279. The following loan scenario is only an example. Actual amounts, fees, and rates vary depending on each individual borrower’s situation and additional factors. Loan example is based on a 30 year fixed FHA mortgage loan with 3.5% down. Amounts are based on a loan amount of $200,000, interest rate of 5.375%, APR of 6.714%, and down payment of $7000 as well as estimated additional funds due at closing of $5,554. Approximate monthly payment of $1,495. Loan Amount includes 1.75% upfront fee. Loan scenario does not include additional fees associated with monthly mortgage expenses such as HOA fee. All amounts shown are estimates and will vary for each loan. All figures are given for comparison purposes only and are not a commitment to lend or extend credit. Program availability is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. Additional restrictions may apply. On Q Financial, Inc. is an Equal Housing Lender. NMLS 5645 OnQ0628190681Y000005Jxl6