Basic FHA Loan Requirements in Boca Raton
If you have never heard of FHA home loans the acronym stands for Federal Housing Administration. With the exception of Veteran Affairs home loans, they are the easiest to qualify for.
You can still be eligible for an FHA loan with a low amount of down payment as well as a low credit score. To be more specific, in order for you to qualify for Boca Raton FHA loans all you need is a 3.5% down payment as well as a 580 credit score.
The reason why a borrower would be able to borrow with very low requirements is because the Federal Housing Administration, an agency owned by the government. However, FHA loans borrowers are expected to pay monthly mortgage insurance premiums that are usually about 0.85% of the total loan amount.
Credit Score Requirements for FHA Loans
In order to qualify for an FHA loan with an of 90%, you need to have a credit score that is not below 500. This means you are required to make a 10% down payment. However, chances are that you will not qualify to be approved to be a subprime borrower with a credit score below 580. With a credit score of 580, you can expect to qualify for an FHA loan with an LTV of 96.5% (another way of saying you will need a 3.5% down payment).
To better your chances for FHA loans eligibility consider improving your credit score to 580 or higher.
FHA Loans for First-Time Homebuyers
FHA loans are very popular with first-time homebuyers because of their minimal requirements for eligibility. In fact, one of the major misconceptions out there is that only first-time homebuyers are eligible. This could not be further from the truth.
The reason why this is assumed so is quite understandable. Most first-time homebuyers have bad credit.
The downside to having a bad credit score when applying for an FHA loan is that, if you qualify, you will have a much higher interest rate than a person with a higher credit score.
Here are some things you can do to improve your credit score:
- Get a free credit report from the government’s website
- Identify any negative accounts you might have
- Make sure to clear credit balance that is due
- Call a collection agency and let them know that you want to do a pay for delete. Once you pay them any amount you owe they will entirely delete from your credit report.
If you notice that there are errors in your credit card report launch a dispute with the agency that issued the report and wait for 30 days while they conduct their investigation. If your claims are legitimate, your credit report will be repaired to reflect accurate information.
Another misconception is that FHA loans are meant for people with low credit scores, or those that cannot afford more than a 3.5% down payment. Again, this is not true. Figures show that over 40% of all homes in the United States are financed by an FHA loan.
If you are in the low to median income bracket and are thinking of getting a home, then there is no reason why you should not consider getting a Boca Raton FHA loans. Unlike with conventional loans, lenders are able to loosen the strict guidelines for FHA loans. This is because the terms of the debt to income ratio allow for less.
Down Payment Requirements
When applying for a conventional home loan you require at least 5% of the home’s value. However, this is not the case with FHA loans that typically require a 3.5% down payment. For instance, let us say you are purchasing a home with a value of $200,000. If you were to use a conventional home loan the minimum down payment you would make is $10,000.
However, with an FHA loan, a 3.5% down payment means that you will only be expected to pay $7,000. Another thing you need to take note of is that the down payment can be a gift so long as the person who is gifting you the money meets the FHA’s requirements.
An employer, charity, friend or even a relative, can gift you the money as long as they have invested interest in you, that is, the borrower.
Would you like to find out more about Boca Raton FHA loans? Get in touch with us for an in-depth explanation.