Do you want to buy a house? Check if you are eligible for this type of affordable loan

One of the usual requirements that are essential to obtain a mortgage loan and for which many applications are often rejected is having an excellent credit score. For those who have worked hard but feel they are making no progress in improving their credit history, perhaps they should apply for an FHA loan.

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). Among its main benefits is that you can make a minimum initial payment of 3.5% for borrowers with a credit score of 580 or more. If you are going to buy a house for the first time, this loan could solve your problems, since due to its characteristics you do not require enormous savings or a great credit level.

How can you qualify for an FHA loan?

Lenders such as banks, credit unions or housing specialists can issue an FHA loan, although you must meet eligibility requirements such as:

Have a valid social security number.

  • Proof of US citizenship, lawful permanent residence, or eligibility to work in the US.
  • Bank statements of at least the last 30 days.
  • Documentation of deposits made during the same previous period (generally payment receipts).
  • Your lender may also obtain credit reports, tax returns, and employment records to confirm eligibility.

Also, like any other type of mortgage loan, the rates you can find for an FHA mortgage will depend on other criteria that you must also meet to apply for it, such as:

  • Credit score. The minimum credit score required is 500, which makes it one of the most affordable loans on the market.
  • Initial payment. Like other mortgage loans, in this one you also need to give an advance. If you have a score of 580 or higher, you could pay 3.5%. A score of 500 to 579 may require you to have a minimum down payment of 10%.
  • Debt-to-income ratio (DTI). This means that the FHA requires that your total monthly debt payments cannot be more than 50% of your pre-tax income, including debts you are not actively paying.
  • Approve property. Regardless of whether it is a home, condo, manufactured home, or multi-family home, it must be endorsed by the FHA. You need to do an appraisal separate from a home inspection.
  • Mortgage insurance. Due to the affordability of obtaining this loan, the FHA has mortgage insurance built into each loan. You must pay this insurance in advance, which you can add to the total amount of the loan, to make monthly payments. The value of the insurance and, therefore, its payments, will depend on the size of your advance. If your payment is the minimum allowed, then you will pay mortgage insurance over the life of the loan; From 10% down, you will only pay the mortgage insurance for 11 years.

According to NerdWallet, it’s easier to qualify for an FHA loan than a conventional loan, which is a mortgage that isn’t insured or guaranteed by the federal government. FHA loans allow for lower credit scores and, in some cases, lower monthly mortgage insurance payments than conventional loans. One potential drawback, unlike conventional loans, is that FHA loans may have closing costs.

An FHA home loan can be used to purchase or refinance single-family homes, two- to four-unit multifamily homes, condominiums, and certain manufactured and mobile homes. Specific types of FHA loans can also be used for new construction or to renovate an existing home. In all cases, the home must meet certain criteria of value and characteristics that make it eligible for the loan, which may vary depending on the state in which you are located.

We recommend you review several lenders with FHA mortgages before choosing the one that suits you best. Currently, the FHA insures loans for approximately 8 million single-family homes.

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