FHA Loan
FHA loans are ideal for first-time borrowers buying a principal residence, with less than perfect or no credit as it offers down payment requirements as little as 3.5% with credit scores as low as 580 and down payments requirements of 10% with credit scores as low as 500. You may still qualify for an FHA loan, even if you have no credit score. FHA loans do carry mortgage insurance which protects the lender if the borrower defaults on the loan.
To be eligible for an FHA loan, the following lending guidelines apply
- Down payment of at least 3.5% of the purchase price is required. The down payment can come from a verified gift from a relative or government program.
- Credit score of 500-579 with 10% down or a credit score of 580 or higher with 3.5% down. [ no credit score may also qualify for an FHA loan]
- Employment history of 2 years or more.
- Income is verifiable through pay stubs, W2, federal tax returns.
- Loan is used for a primary residence.
- Property is appraised by an FHA-approved appraiser and meets HUD property guidelines.
- Two lines of credit are necessary to apply for an FHA loan, but where there is no credit or insufficient credit, FHA will allow alternative credit.
- If you experienced a bankruptcy, you may still qualify for an FHA loan.
Five facts about FHA Loan
FHA loan is a government-backed mortgage insured by the Federal Housing Administration, [FHA]
You do not need a credit score to get an FHA loan. Borrowers with no credit score may still qualify for an FHA loan.
FHA loans require an upfront mortgage insurance premium of 1.75% which may be financed as well as annual mortgage insurance premium of up to .85% [depending on the loan to value]
FHA loans can be used to finance home repairs or upgrades. [ see FHA 203k section]
may be used as acceptable down payment.