FHA Loans 101
Every family deserves a clean, safe, and affordable home. Unfortunately, not everyone can afford the cost of borrowing to purchase a house. The Federal Housing Administration, part of the U.S. Department of Housing Development, works to close that gap with loan programs intended to support prospective homeowners who might not qualify for traditional private mortgages.
The FHA provides guarantees that protect lenders against default, thereby allowing them to lend to a wider variety of people from differing economic backgrounds. The best FHA loan lenders will be well-versed in the different types of FHA loans. Our team at Supreme Lending has put together this brief guide to help you understand FHA loans.
What Is an FHA Loan?
FHA loans are government-backed mortgages that put homeownership within reach of a broader cross-section of buyers. Because the FHA loans carry a government guarantee, they can be offered to people whose incomes may be lower or who may have credit difficulties. FHA loans are open to both first-time homebuyers and repeat homebuyers, and they typically require a lower down payment than conventional mortgage programs. Depending on the type of loan, different programs will have other FHA loan requirements.
FHA Loan Requirements
Prospective buyers must meet certain conditions to apply for FHA loans. One of the most important — loan proceeds can only be used for a home that will serve as your primary residence. In addition, you must have a credit score of at least 580 and a down payment of 3.5%. If you’re able to put 10% down, a credit score between 500 and 579 is acceptable.
One of the significant benefits of FHA loans is their flexibility for people with recent financial difficulties. If you are two years removed from a Chapter 7 bankruptcy or three years from foreclosure, you can still apply and potentially be approved for an FHA loan. Let Supreme Lending’s originators help you understand your eligibility.
Different Types of FHA Loans
The 203(b) program is the most common FHA loan, which guarantees applicants to purchase single-family homes as their primary residences. However, the FHA also provides guarantees for other types of transactions. A few of the most active:
- Section 203(k) loan for renovation and rebuilding, focused on home improvements and repairs.
- Section 245(a) loans for buyers who expect their incomes to increase over time. These loans start with a lower initial monthly payment that grows with income.
- FHA Energy Efficient Mortgage to fund upgrades in insulation or installing renewable energy systems such as solar or wind.
- Home equity conversion mortgage for seniors, also known as a reverse mortgage, which allows existing homeowners to withdraw portions of their equity over time as a supplement for their retirement.
Loan Advice From Supreme Lending
You may wonder, “Who are the best FHA loan lenders near me?” Consider working with the licensed loan originators at Supreme Lending of Houston, Texas. We pride ourselves on developing customers for life and are fully committed to helping simplify the home-buying process to make it as stress-free as possible. We are unique in that we are structured as mortgage bankers, which gives us the freedom to offer various mortgage lending services. Work with one of our originators today, and we will help determine the best solution for your home-buying needs. Call us or contact us online for a consultation.