Why FHA May Be Your BFF

The FHA (Federal Housing Administration) offers several programs to encourage home ownership. These programs are popular with borrowers because they allow home purchasing with a smaller down payment than most other lenders typically require. An FHA loan may make it easier for you to qualify for a mortgage, and help you achieve your dream of becoming a homeowner.

What is an FHA Loan?

FHA loans are insured by the Federal Housing Administration against default. In other words, they guarantee your lender will not have to write off a loan you default on. Based on this guarantee, your lender will be willing to make large mortgage loans.

Will I Qualify for an FHA Loan?

Unlike most first time home buyer programs, there are no income limits, meaning that almost anyone can qualify for an FHA loan. However, there are limits on how much you can borrow. In general, you will be limited to a modest loan amount based on housing prices in your area. You will need a reasonable debt to income ratio to qualify for an FHA loan and decent credit.

What is so great about FHA loans?

FHA loans allow you to purchase a home with a down payment as little as 3.5%, whereas other loan programs typically require a much larger down payment. You may also fall in love with these FHA bells and whistles:

  • No prepayment penalty (beneficial for subprime borrowers)
  • FHA loans may be assumable
  • Easier to use gifts of cash toward down payment and closing costs
  • FHA 203k programs for funding home improvements
  • Possible leniency during financial hardships

To find out if an FHA loan is right for you, or to learn more about market watch trends in Orange County, contact real estate expert Judy Qualls.