**As of 12/3/2021, this product is based on a rate and term refinance loan with 70% loan to value ratio, a 740 credit score, paying 1.25% discount points, on an owner-occupied principal residence, an interest rate of 3.77% and APR of 3.87% for a 40-year loan with an interest only period for the first ten years and fully amortized payments for the remaining 30 years of the 40-year term. Your loan terms and interest rate may be different depending on your credit score, your loan to value ratio, how many discount points you pay, when you lock in your interest rate, the property’s occupancy type, and other factors.
How FHA Loans make home ownership more achievable
Buying and refinancing a home can be simplified with an FHA loan. This type of home loan is insured by the Federal Housing Administration, allowing customers with less than perfect credit or no credit history to qualify for a home loan. Others who may have had a foreclosure or bankruptcy can also qualify to buy a house or refinance an existing mortgage through the FHA program. FHA loans often require less of a down payment and may require less documentation than a conventional loan but also requires a monthly mortgage insurance premium to be paid - potentially for the life of the loan.
In 2022 FHA mortgages let homebuyers purchase a home with a very small down payment. The FHA loan limit for most of the country is $420,860 and up to $970,800 in high-cost areas, which covers a wide range of potential properties (these amounts may change annually).
What are the benefits of an FHA Loan?
FHA loans bring homeownership into reach for many borrowers because FHA loans allow for expanded qualification requirements. People with little or no credit or someone with less-than-optimal credit can often qualify.
FHA loan programs can be popular with first-time home buyers and buyers looking to upgrade their current home size as FHA loans allow home ownership with a lower down payment and somewhat flexible underwriting standards. Home types can be single-family detached homes, 2–4-unit homes, condos, row houses.
However, one thing to note, FHA requires that all borrowers pay a Mortgage Insurance Premium (MIP) for the life of the loan if the borrower does not provide a 20% down payment. That amount is required monthly and will increase a borrower’s monthly payment. Borrowers should compare the pros and cons of an FHA mortgage against other loans to determine which product works for them.
How strict are FHA Loan requirements?
FHA home loan borrowers usually fit the following criteria:
· Average credit scores
· Low down payment, which may be a gift or local grant (up to 100%)
Are FHA loans available to self-employed individuals?
Oftentimes, yes, if the business owner(s) can provide tax returns from the previous two years and other financial statements showing the health of the business. If the business is younger than two years, but a solid work and income history has been established in a similar occupation, an FHA loan is possible, too.
Do recent credit events prevent FHA loan qualification?
If you’ve improved your credit in the three years since a foreclosure or in the two years since a bankruptcy, you may still qualify for an FHA loan.
Are closing costs more expensive with FHA Loans?
Closing costs vary based on loan amounts, however, an advantage of FHA loans is that the seller of the property is allowed to pay some of the closing costs, such as origination fees, attorney fees, appraisal costs, and others, on the buyer’s behalf. Some sellers incentivize the purchase of their home by advertising these allowances, if they’re having trouble finding a buyer.
Can an FHA Loan be used to refinance?
Yes, an FHA Streamline Refinance is an easy way to finance your current FHA mortgage! It does not require credit qualification or income verification, and the home appraisal is not required if you refinance your existing FHA loan. Have more questions on FHA loans?
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Whether you’re a small business owner, yoga instructor, seasonal employee, freelancer/contract employee, or investor, Sprout can help you get a mortgage!
This communication does not constitute a commitment to lend or the guarantee of a specified interest rate. All loan programs and availability of cash proceeds are subject to credit, underwriting and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.