Home ownership may be closer than you thought. Find out how an FHA loan can help you purchase a house, even if you have a lower credit score or existing debt.
FHA Home Loans
What is an FHA Loan?
An FHA loan is a government-backed mortgage loan with additional requirements. These home loans are backed and insured by the Federal Housing Administration (FHA), meaning the lender is insured in the event that a homebuyer defaults on the loan.
These loans are specifically designed to simplify the path to home ownership for low-income borrowers. With lower down payment options, lower closing costs and low minimum credit scores, FHA loans can be a huge advantage for first-time homebuyers who may not meet the criteria for another type of mortgage.
There are a few requirements homebuyers should know about. For one thing, the home you purchase with your loan must be your primary residence–not an investment property. You must move into the home within 60 days of closing. Additionally, the home will need to be inspected by an FHA-approved appraiser.
Location, location, location… loan amounts can be as much as $472,030 for low-cost areas and $1,089,300 for high-cost areas.
Because these loans are government-backed and risk is low, lenders can offer more competitive interest rates.
Standard loan term is 30 years.
FHA loans are known for requiring smaller than average down payments–as little as 3.5%.
Enjoy more flexibility with a lower credit score–580 is the minimum credit score required for this loan option.
You must have your home appraised by an approved appraiser, live in the house as your primary residence, and move into the house within 60 days of closing.
Current FHA Loan Rates
FHA Loan Requirements
Generally speaking, FHA loan requirements may differ from conventional guidelines. For one thing, any home you’re interested in purchasing must be appraised by an FHA-approved appraiser. The home you purchase must be your primary residence (not an investment property or vacation home). Once you close, you must move into the home within 60 days.
FHA Loans vs Conventional Loans
If you’re not sure whether to choose an FHA loan or a conventional mortgage, consider this: though conventional loans have lower interest rates and mortgage insurance requirements that drop off after the loan to value (LTV) is 80% or less, they also have stricter financial requirements. On the other hand, FHA loans require monthly insurance payments throughout the life of the loan (or 11 years with a 10% or more down payment). Both types of home loans have their advantages and can mesh well with your lifestyle, depending on your needs and abilities.
Common Types of FHA Loans
Federal Housing Administration loans come in a few different shapes and sizes. Keep in mind that the type of FHA loan you choose will generally limit what kind of home you can purchase, as well as how much you can spend. If you don’t see a loan here that fits your needs, let us know–in most cases, we can help you find a mortgage that works with your financial situation.
1. Traditional Mortgage
This is the most basic type of FHA loan. It’s designed to help you purchase a primary residence with more competitive interest rates, a smaller down-payment and lower credit score requirement.
2. Cash-Out Refinance
Even with a credit score as low as 600, you can borrow up to 80% of your home’s value with a cash-out mortgage refinance. This kind of FHA loan can help you convert your home equity to cash, which you can then use for big expenses, debt payments and even home improvement projects.
3. FHA Rate/Term Refinance
If you’re having a hard time making your monthly mortgage payment or want to take advantage of lower interest rates, an FHA rate and term refinance may help. With this loan, you can change the terms of your current loan or even change your loan type to your advantage.
4. Energy Efficient Mortgage Program
Go green with an FHA loan specially designed to support energy-efficient home features. This loan enables homebuyers to purchase a home or upgrade their existing home with cost-saving, energy-efficient improvements, ideally leading to lower monthly utility bills.
Common Questions about FHA Loans
Is it possible to get rid of my FHA mortgage insurance?
Unless you put down 10% or more, FHA mortgage insurance lasts for the life of the loan, or for 11 years depending on the loan’s length. The only way to get rid of FHA mortgage insurance is to refinance to a conventional loan.
How much does FHA mortgage insurance typically cost?
Your mortgage premium–typically 1.5% of your loan balance–is due upfront at closing. Your annual mortgage insurance premium will be paid alongside or as a part of your monthly mortgage payment. The amount is based on repayment terms plus your loan to value (LTV) ratio.
What are the advantages and disadvantages of an FHA loan?
FHA loans can be great advantages for homebuyers with lower credit scores, smaller down payments, and higher debt-to-income ratios. However, mortgage insurance for FHA loans tends to last longer, and appraisal requirements are often stricter.
What is the Federal Housing Administration?
The Federal Housing Administration is a government organization created during the Great Depression, when home ownership was widely inaccessible, to help more borrowers qualify for home loans. Thanks to this great organization, American home ownership has climbed over the years.
Everyone Deserves a Home
According to the National Institute to End Homelessness, over 7,600 Nevadans experience homelessness on any given day, with nearly 20% being children and teens. Our Keys to Greater program donates a portion of the revenue from every new mortgage or refinance to community nonprofit organizations that address homelessness, which has resulted in over $179,500 donated since launching in 2021.
How do I Apply for an FHA Home Loan?
Follow these 3 simple steps below and our team can help see if a FHA loan is the right fit for your goals.
Calculate What You Can Afford
See how much you can afford to borrow on your home purchase with our mortgage calculator.
Submit Your Application
It’s quick. It’s easy. It’s online. Plus, we have a mortgage documents checklist so you know what information to gather.
All your home loan questions are answered by your dedicated Mortgage Consultant and their team as you learn about what options work best for your goals.
APR = Annual Percentage Rate. APR is the cost to borrow money expressed as a yearly percentage. For mortgage loans, excluding home equity lines of credit, it includes the interest rate plus other charges or fees.
Rates and terms are subject to change without notice. Rates are for illustrative purposes only, and assumes a borrower with a credit score of 700 or higher which may be higher or lower than your individual credit score. Adjustable Rate Mortgage (ARM) loans are subject to interest rate, APR, and payment increase after each change period. For instance, a 5/5 ARM means that you will pay a fixed rate for the first five years of the loan, and then your rate is subject to change once every five years thereafter through the remainder of the loan. Interest rates and APRs are based on current market rates, and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Depending on loan guidelines, mortgage insurance may be required. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. Your loan’s interest rate will depend upon the specific characteristics of your loan transaction and your credit history up to the time of closing. The estimated total closing costs in these rate scenarios are not a substitute for a Loan Estimate, which includes an estimate of closing costs, which you will receive once you apply for a loan. Actual fees, costs and monthly payment on your specific loan transaction may vary, and may include city, county or other additional fees and costs. Not all loan options are available in every state. Borrower is responsible for any property taxes as a condition of the loan. Membership with Greater Nevada Credit Union is required for select loan options. This is not a credit decision or a commitment to lend.
Please contact a Mortgage Consultant to learn about all details on loan options and programs available. You may contact one directly, or call Greater Nevada Mortgage at 775-888-6999 or 800-526-6999. We do business in accordance with the Federal Fair Housing Law and the Equal Opportunity Act, and the California Fair Employment and Housing Act.