Most first-time homebuyers go for an FHA mortgage to buy their starter home. The reason is the attractive low-interest rates, low down payment requirements and easy application approval.
The government agency FHA allows home buyers even with bad credit and can only afford minimum down payment. This alone makes it a go-to mortgage options of many.
But before you move on with your mortgage application, make sure you know the following facts about FHA Loans Midland Texas.
FHA mortgage lenders allow borrowers to have at least 580 credit score to qualify for the loan. Some will even approve your home loan application even if you only have 500 FICO score – provided you have some compensating factors like a good DTI and LTV ratio.
The Federal Housing Administration insures your FHA mortgage but is not the one who will lend you the funds to buy a house. Since you’re paying less than the standard down payment amount, you will need to pay for two mortgage premiums. The first one is an upfront fee, and the second being the annual fee.
Recommended Read: How to Calculate Mortgage Insurance on an FHA Loan
Not all lenders are the same. When finding a lender who offers FHA loans, it is crucial that you find one that is FHA-approved. It is essential to note that while these lenders are FHA-approved, they will have different costs and rates, which is why it is essential for you to shop around.
FHA mortgage allows the whole 3.5% down payment from the gifts you received from family members. However, there are guidelines to follow. You need to write a “down payment letter gift” which includes the amount gifted, where the fund will come from, and your relationship with the person giving you the gift. You will also need to write a clear explanation that the down payment you received is not a loan, but a gift.
You can use FHA loans not only to buy a house but to also pay for home improvement projects and repairs. If you don’t get approved for Home Equity Loans or HELOCs, you can always go for an FHA Title 1 Loan program. You can also piggyback an FHA Title 1 Loan program to fix the house you bought with a first mortgage.
According to the US HUD, the closing cost your mortgage lender will charge should not cost more the 3%-5% of the total mortgage amount. The state you plan to buy a house in, and the size of your home loan are the basis of your total closing cost.
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