The Federal Housing Administration (FHA) was created in 1934 to not only improve the housing market, but to provide protection for lenders in the event of borrower default. By insuring loans made by approved lenders, the FHA allows lenders to offer financing to a wider range of borrowers. Since 1934, over 34 million mortgages have been insured by the FHA and currently there are 4.8 million single family mortgages being insured. West Ridge Financial offers a number of FHA loan programs throughout Roosevelt, Vernal, Alpine and all of Utah.
FHA-backed mortgages are available for many purposes including purchases, refinances, reverse mortgages, and even renovation projects. FHA loans have gained popularity among first-time home buyers given that they tend to be one of the easiest mortgages to qualify for. For borrowers with existing FHA loans, cash-out refinance and streamline refinance programs are available. Seniors in need of cash are able to tap into the equity in their homes through the FHA’s reverse mortgage program known as the Home Equity Conversion Mortgage (HECM) program.
The FHA 203k program is a unique housing renovation program that allows a borrower to finance the purchase of a home as well as expenses to repair the home into a single mortgage. There is a standard 203k loan used primarily for larger projects as well as a streamline 203k loan for smaller renovation projects with less than $35,000 in repairs.
FHA loans have gained popularity because of their low down payment options and relaxed credit requirements. Borrowers could potentially qualify with a credit score of 580 and a down payment of only 3.5 percent. If you do not have the down payment on hand, the FHA even allows this to be gifted from a family member.
Typical FHA Loan Requirements
- Credit Score – A credit score of at least 580 is normally required to qualify for an FHA loan. If your credit score is between 500 and 579 you could potentially qualify with a down payment of at least 10 percent.
- Income Requirements – A maximum debt-to-income ratio of 43 percent is standard although a debt-to-income ratio of up to 50% percent can be approved in special circumstances.
- Down Payment – A down payment of 3.5 percent of the purchase price is the minimum requirement.
- Property Requirements – The property being purchased must meet certain safety, security, and soundness (structural integrity) requirements.
Two types of mortgage insurance premiums (MIP) must be paid with an FHA loan. One is paid up front while the other is a recurring monthly premium. The upfront mortgage premium is 1.75% of the home loan. This premium can be paid at closing or rolled into the mortgage. The recurring premium is an annual mortgage insurance premium which is paid on a monthly basis. This mortgage insurance is based on loan-to-value (LTV) ratio, loan amount, and length of the loan and will be between .80% and 1.05%.
The maximum loan amount available for an FHA loan is limited by county.
Whether you are looking to purchase your first home, or want to refinance an existing FHA loan for a lower rate, West Ridge Financial is your lender. As a local Utah lender, we have the knowledge and expertise to assist borrowers FHA loan programs available throughout Roosevelt, Vernal, and Alpine. Contact us today to see how we can help you.