Knowledge Mondays - What you Need to Know about FHA Loans?
A Federal Housing Administration (FHA) Loan is a mortgage that is insured by the Federal Housing Administration. FHA loans are extremely popular with first time home buyers because they allow down payments of only 3.5%. With an FHA loan not only is the down payment amount minimal, but the credit score required can be as low as 580.
Although FHA loans are popular with first time home buyers, any buyer may apply for an FHA loan. FHA loans are extremely beneficial for buyers with low credit scores because FHA does not require the minimum 620 credit score that is usually required to get a conventional mortgage. Additionally, FHA’s do not have any income limitations. Therefore, when it comes to income there are no rules that state that the FHA will deny a loan because a buyer earns too much. As for income minimums, FHA focuses on the buyer’s ability to afford the mortgage, thus they look at the debt to income ratio as well as the repayment history on financial obligations, and the buyer’s job.
FHA loans do have a few drawbacks. One of the biggest disadvantages that comes with an FHA loan is the fact that a homeowner will have to pay mortgage insurance premiums. A mortgage insurance premium is an insurance that is mandatory if a buyer makes a payment of less than 20% of the purchase price at closing. The mortgage insurance premium lowers the risk to the lender and increases the cost of your loan. With an FHA loan, the buyer has to pay 1.75% of the loan amount towards the insurance premium at closing as well as pay the annual premiums, which range between 0.45% to 1.05% of the property’s outstanding loan. Additionally, the FHA does have loan limits. In Florida, most counties have a 2019 FHA loan limit of $314,827 for a single-family home. However, Miami-Dade County has a higher limit of $356,500 and Monroe County has the highest limit with $529,000 for a single-family home.
If you would like to discuss your property purchase contract, schedule a consultation with the experienced attorneys at Alvarez Law Group today. Call us at (786) 620-2820 or email firstname.lastname@example.org to schedule a consultation.
*Disclaimer: this blog post is not intended to be legal advice. *