FHA Loans

FHA (Federal Housing Administration) mortgage programs are government-backed loan programs designed to help individuals and families become homeowners, particularly those with lower credit scores or limited down payment funds. The FHA does not directly lend money to borrowers but insures mortgages issued by approved lenders, providing them with greater confidence to offer loans with more lenient requirements. Mike Stoy at Epic Mortgage has been helping borrowers get into FHA loans for over 30 years and can help you understand the program to make sure it is the best possible option for your situation.

Here are some key aspects and features of FHA mortgage programs:

• Low down payment: One of the primary advantages of FHA loans is the lower down payment requirement. Borrowers may be eligible to obtain an FHA loan with a down payment as low as 3.5% of the purchase price. This is significantly lower than the typical 20% down payment required for conventional loans.
• Lenient credit requirements: FHA loans are more forgiving when it comes to credit scores. While specific lender criteria may vary, borrowers with credit scores as low as 580 may be eligible for an FHA loan. Those with lower scores can still qualify but may need to provide a larger down payment.
• Mortgage insurance: FHA loans require borrowers to pay mortgage insurance premiums (MIP). These premiums serve as insurance for the lender in case the borrower defaults on the loan. The MIP is paid both upfront at closing and as part of the monthly mortgage payment. However, the MIP rates can be adjusted depending on factors such as the loan term and the loan-to-value ratio.
• Flexible debt-to-income ratio: FHA loans generally have more lenient debt-to-income (DTI) ratio requirements compared to conventional loans. The DTI ratio is a measure of a borrower's monthly debt payments in relation to their gross monthly income. FHA loans typically allow a higher DTI ratio, making it easier for borrowers with existing debts to qualify.
• Property requirements: FHA loans have certain property requirements to ensure the property is safe and habitable. These requirements include factors such as the property's condition, safety features, and adherence to local building codes. An FHA-approved appraiser will assess the property to determine its eligibility.
• Streamline Refinance: FHA offers a streamline refinance program that allows existing FHA borrowers to refinance their loans with reduced documentation and underwriting requirements. This program aims to help borrowers take advantage of lower interest rates or to refinance into a more stable mortgage.

It's important to note that FHA loans are not limited to first-time homebuyers and can be used for the purchase or refinancing of primary residences. Additionally, FHA loans have loan limits that vary by county, so it's essential to check the limits for your specific area.

To apply for an FHA loan, you would need to work with an FHA-approved lender like Epic Mortgage who will guide you through the application process and provide information about the specific loan options available to you based on your financial situation.

FHA loans are an attractive option, especially for first-time homeowners because it is insured by the Federal Housing Administration (FHA).  Primarily, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. Typically the borrower can be approved with 3.5% down vs 20% that is required on other loan programs.