By Angella Jones
Special to Texas Metro News
An FHA mortgage is a popular option for first-time home buyers. These loans offer attractive terms, including the ability to make smaller down payments along with flexible credit and income requirements.
What is an FHA Loan?
FHA stands for Federal Housing Administration. The FHA insures certain loans with the intention of making it easier for people who would not otherwise qualify for a home loan to do so.
FHA loans are available for homes that are detached, semi-detached, row houses, condos and townhouses. However, not all homes are eligible for FHA mortgages. In fact, in order for a home to quality, the buyer must live in the home. An FHA loan cannot be used to buy a home as an investment rent- al property or for buying a vacation home.
FHA loans require that borrowers purchase mort- gage insurance. The full amount of the mortgage insurance premium can be paid up front in one lump sum, financed into the mortgage or paid in payments, outside of the mortgage payment, for the full monthly amount.
The home must also be appraised by an FHA-approved appraiser and deemed to meet certain conditions in order to qualify for the FHA loan program. The appraisal will determine the home’s structural soundness and value.
Key Benefits
Smaller down payments, using gifts or borrowed funds for a down payment and no prepayment penalties are all perks of an FHA loan. Credit flexibility is another plus – applicants with lower scores or limited credit history may qualify with a score as low as 580.
FHA Mortgage Qualifications
In addition to credit, the FHA also evaluates employment when determining loan qualification. Borrowers must be able to show documentation of two years of steady work in the same field with no more than one month’s worth of employment gaps during that period.
A borrower’s debt-to-income ratio is another key factor in qualifying for an FHA loan. No more than 50 percent of a borrower’s income, including mortgage payments, can be tied up by debts, such as taxes, insurance, credit cards, auto loans and student loans.
The Bottom Line
An FHA loan can be a great option for purchasing a first home, but there may be other loan programs that can benefit borrowers as well. Working with a trusted mortgage lender is the best way to determine which loan program is the right fit.
Angella Jones is a community mortgage lending originator with Independent Financial. She specializes in helping new buyers achieve home ownership. Connect with Angella at 214.370.6115 or Angella.Jones@IFinancial.com.
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