Reviews (US)

FHA loans review: what you need to know before applying

In this FHA loans review article, you will learn how it works and how it offers accessible and affordable rates for you to fulfill your dreams. Check it out!

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by Aline Augusto

Published on 02/19/2022

FHA loans: accessible and affordable mortgage!

Check out our FHA loans review. Source: Pixabay.
Check out our FHA loans review. Source: Pixabay.

FHA means Federal Housing Administration. Learn everything about its loans by reading this FHA loans review.

FHA and its goal is to increase homeownership in the U.S. through an accessible and affordable mortgage program.

It is designed to attend first-time home buyers, mainly those with a poor credit score who couldn’t apply for traditional lenders.

Although it requires insurance, as the lower credit score and smaller down payment you have and make, it is still more accessible than other loans in the market.

So, check out how it works so that you can start dreaming about your own home!

APRIt depends on the lender offer
LOAN PURPOSEMortgage
LOAN AMOUNTSFrom $420,860 to $970,800 (it can vary according to the county)
CREDIT NEEDEDPoor
TERMSIt depends on the lender offer
ORIGINATION FEEIt depends on the lender offer
LATE FEEIt depends on the lender offer
EARLY PAYOFF PENALTYIt depends on the lender offer
Notas de dinheiro voando

How to apply for FHA loans?

An excellent option for those with a poor credit score who are planning to buy their first dream home, learn how to apply for FHA loans!

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How do the FHA loans work?

You must first know that an FHA loan requires FHA mortgage insurance. This insurance is a way to protect the lender if you don’t accomplish paying your mortgage.

They also call this insurance mortgage insurance premiums. If you manage to pay 20% of your down payment, you can avoid the insurance.

However, this is high, so most borrowers stick with the insurance.

Then, you will pay two premiums in this case, one upfront, which requires 1.75% of the total amount in upfront mortgage insurance. And one annual, which is divided by 12 so you will pay for it month by month.

This insurance will continue unless you finish paying all your due or refinance using a conventional loan to eliminate this cost.

Even though FHA focuses on first-time buyers, you don’t necessarily need to be one to qualify for a loan.

The main benefit of it is that you can qualify with a down payment of as little as 3.5% for a credit score of 580 or higher. But, the better deal you will have if the higher credit score you have.

FHA loans benefits

FHA can help you to buy your dream home. Source: Pixabay.
FHA can help you to buy your dream home. Source: Pixabay.

The main feature of this loan is that you can apply even with a poor credit score. Even though the rates won’t be the lowest, it is still accessible and affordable compared to conventional loans.

Also, it is designed especially for first-time buyers. 

On the other hand, the downside is that it requires insurance to protect the lender. The only way to avoid it is to pay 20% of your down payment, which is pretty high.

Pros

  • It is accessible and affordable;
  • People with poor credit scores can apply for an FHA loan;
  • It is designed especially for first-time homebuyers;
  • It offers low down payments.

Cons

  • It requires mortgage insurance.

Should you apply for FHA loans? 

FHA loans are a good option if you qualify as a first-time homebuyer with a lower credit score. Otherwise, it would be best if you looked for conventional loans.

Can anyone apply for a loan from FHA?

Borrowers must have a steady employment history, a valid Social Security Number with two years out of bankruptcy.

People with a minimum credit score of 500-579 need a minimum down payment of 10%. And people with a 580-score need a minimum down payment of 3.5%.

Furthermore, new FHA loans are available for first-time homebuyers only.

Read the terms and conditions before applying for a loan.

What credit score do you need for FHA loans?

FHA accepts poor credit scores. But, the higher the score is, the better deal you can get.

How to apply for an FHA loan?

Now, learn how to apply for a loan with FHA.

Notas de dinheiro voando

How to apply for FHA loans?

An excellent option for those with a poor credit score who are planning to buy their first dream home, learn how to apply for FHA loans!

About the author

Aline Augusto

My name is Aline Mesquita; I'm a writer here on the blog, where I write about finance in general and other subjects. I have been working with content creation for ten years. Also, I'm post-graduated in Project Management, with expertise in SEO practices. Currently, I am studying finance, market trends, and cryptocurrencies.

Reviewed by

Aline Barbosa

Senior Editor

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