Since 1934, over 34 million mortgages have been insured by the Federal Housing Administration (FHA) and currently there are 4.8 million single family mortgages being insured. The FHA was created in 1934 to stimulate the housing market as well as protect lenders from borrower default. By insuring these loans made by approved lenders, the FHA makes it easier for a wide range of borrowers to qualify for a mortgage. Austin Mortgage Associates offer a number of FHA loan programs throughout Round Rock, Cedar Park, and Georgetown.
FHA loans cater to a variety of borrower needs including purchases, refinances, reverse mortgages, and even renovation projects (FHA 203k Program). First-time home buyers can benefit from FHA loans as they tend to be one of the easiest mortgages to qualify for. For homeowners who already have FHA loans, cash-out refinance and streamline refinance programs are available.
Low down payment options and relaxed credit requirements have led to the increasing popularity of FHA loans. It is possible for borrowers to qualify for an FHA loan with a credit score as low as 580 and a down payment of only 3.5 percent. Even if you do not have the minimum down payment available, the FHA allows this to be gifted from a family member.
Typical FHA Loan Requirements
- Credit Score – 580 is generally the minimum credit score required to qualify for an FHA loan. If your credit score falls between 500 and 579 you could potentially qualify if you can provide a down payment of at least 10 percent.
- Income Requirements – A maximum debt-to-income ratio of 43 percent is standard in most cases although a debt-to-income ratio of up to 50% percent may be approved in certain situations.
- Down Payment – A minimum down payment of 3.5 percent of the purchase price is required.
- Property Requirements – The property being purchased must meet certain safety, security, and soundness (structural integrity) requirements.
Mortgage insurance premiums (MIP) must be paid with an FHA loan. There are two separate MIPs that a borrower will be responsible for. One paid up front while the other is a recurring monthly premium. The upfront mortgage premium is 1.75% of the home loan. This MIP can be rolled into the mortgage or paid at closing. The recurring premium is an annual mortgage insurance premium which is paid monthly. This MIP is based on the loan-to-value (LTV) ratio, loan amount, and length of the loan and will be between .80% and 1.05%.
The maximum loan amount available for an FHA loan is limited by county.
FHA Loans can be a great choice for first-time homebuyers or borrowers who may not have the down payment requirement for a more conventional loan. Whether you are looking to purchase your first home in Austin, or are seeking a lower rate on an existing FHA loan, our team of experienced professionals at Austin Mortgage Associates can assist you. Contact us today for any questions you may have about FHA loans, or to see if you may qualify!