FHA Home Loans

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). This type of loan is designed to make homeownership more accessible to a broader range of individuals and families by offering more flexible qualification criteria and lower down payment requirements.

Tip: Did you know the Federal Housing Administration doesn’t issue mortgages itself? Instead, the agency provides insurance on mortgage payments so that more borrowers can get home financing through an FHA-approved lender, such as a bank or mortgage company. The borrower pays the FHA a mortgage insurance premium (MIP). This allows the FHA to insure your loan and ensure the lender is protected from loss if you cannot repay the loan.

1. Low Down Payment: One of the most significant advantages of FHA loans is the lower down payment requirement so you can achieve your dreams of owning a home.
2. Flexible Credit Requirements: FHA loans are often more forgiving when it comes to credit scores. While traditional mortgages may require higher credit scores, FHA loans allow for lower credit scores, making homeownership achievable for more people.
3. Competitive Interest Rates: FHA loans offer competitive interest rates, ensuring that you receive favorable terms and an affordable monthly payment.
4. Streamlined Refinancing: If you already have an FHA loan, you may be eligible for streamlined refinancing, which can help you lower your monthly payment or shorten your loan term.
5. Assumable Loan: FHA loans are assumable, which means that if you decide to sell your home, the buyer can take over your existing FHA loan, subject to lender approval. This feature can be an attractive selling point and potentially make your home more marketable.

Tip: Did you know that the FHA Allows 100% Gift Funds Options? In addition to a low-down payment, those funds can sometimes come from a gift.

FHA Fixed-Rate Mortgages

FHA Fixed-Rate Loan:

• All the benefits of a fixed-rate loan.
• Low down payment options.
• Gift funds are allowed.
• Ability to Streamline Refinance.

FHA Streamline Fixed-Rate Refinance Loan:

• Lower your payment by lowering your current interest rate.
• Convert an FHA adjustable-rate mortgage into a fixed-rate mortgage.
• Require less documentation than a traditional loan.
• No appraisal is required.
• No income documentation.

1. Credit Score: FHA loans are more lenient compared to conventional loans and typically require a minimum credit score of 580 to qualify for the lowest down payment option. However, borrowers with credit scores between 500 and 579 may still be eligible but will need to make a larger down payment.
2. Income and Employment: Your income stability and employment history ensure your ability to repay the loan. Generally, you’ll need to provide proof of steady employment and income for the past two years, such as pay stubs, W-2 forms, or tax returns.
3. Debt-to-Income Ratio (DTI): The FHA sets a minimum DTI ratio of 43%. This means that your total monthly debt obligations, including the new mortgage payment, should not exceed 43% of your gross monthly income.

• A credit score of 500 or higher.
• Down payment depending on credit conditions.
• Proof of income and consistent employment with verification. This can include tax returns, pay stubs, or W-2s for a minimum of two years.
• Mortgage insurance. Proof of the ability to pay the mortgage insurance premium (MIP) is required. The dollar amount of MIP will depend on the amount of the loan.
• Primary residency only. The loan must be for a principal residential property.
• Higher inspection requirements making sure the home is move-in ready.
• Higher Debt-To-Income Ratio

There are many FHA home loans, and FHA loan requirements vary depending on the loan type.

• A credit score as low as 500.
• Proof of steady income and consistent employment which can include tax returns, pay stubs, or W-2s for a minimum of two years.
• Mortgage insurance. Proof of the ability to pay the mortgage insurance premium (MIP) is required.
  • Tip: Did you know that the dollar amount of MIP will depend on the amount of the loan? However, all FHA loans will require borrowers to pay an upfront MIP and a monthly mortgage insurance premium for the life of the loan.
• Higher home inspection standards.
• Primary residency only. The loan must be for a principal residential property.

Higher Debt-To-Income Ratio: FHA loans can have a DTI of as much as 43% under specific circumstances.

Purchasing Your First Home

Purchasing a first home is an exciting milestone in any person's life. The process can be intimidating. Here at Carrington, we do not want it to be. That's why we’re here to help educate and assist you along the way. If at any time you need assistance, please reach out to our Homeownership Concierge.

How Much Can I Afford?

“What can I afford?” This is a common question. There are many factors that determine what a reasonable mortgage payment should be, including annual income, existing debt payments, and down payment (if any), as well as additional costs like homeowners’ insurance and property tax.

Carrington Mortgage Services provides a handy Mortgage Payment Calculator to help homebuyers find a monthly payment that’s comfortable for them.

Getting Preapproved

The first step toward securing your loan is getting preapproved. A pre-approval will assure a seller that you are prepared and have walked through the finer details with the mortgage professional vs. a prequalification. The approval process is a comprehensive analysis to determine your credit ability. Preapproval

Should I use a Real Estate Agent?

When using an FHA Loan, it's important to find a real estate agent who has experience and knowledge of FHA loans. With the Carrington family of companies, you have full access to a professional realtor through Vylla.

How do I apply for an FHA Loan?

The first step in applying for an FHA Loan is finding the lender you want to work with. Because FHA insures the loan and doesn’t directly lend the money, you’ll need to find an FHA-approved lender. Carrington Mortgage Services is standing by to assist you.

After you find your lender, you will want to start gathering documents and identifying your assets. First, you will need proof of income. These can be W-2s, tax returns, or pay stubs. Next, you will want evidence of other investments like alimony or rental income. Be prepared to present documentation of any debts you currently hold.

Your loan officer can assist you and submit a loan application online, via phone, or by email.

Does an FHA Loan Cover Closing Costs?

FHA loans allow certain closing costs to be rolled into the loan amount.

Tip: Did you know that Borrowers can include the upfront mortgage insurance premium (UFMIP) in their closing costs?

FHA loans allow sellers to help offset closing costs like origination fees or appraisal costs for the buyer up to a certain amount. Inquire with your loan officer once approved on the max allowed amounts.

How Much Home Loan Can I Qualify for With an FHA Loan?

The amount you can borrow with an FHA loan largely depends on where you reside.

There are certain areas of the country, such as Los Angeles, San Francisco, and others, where the FHA loan limit for 2023 is higher because the home prices in these markets are higher. Connect with a loan officer directly for limit guidelines in your area.