5 Things You May Not Know About the FHA Loan Process
April 7, 2022at6:00 AM
When you're a first-time homebuyer, you qualify for unique loan products that make the path to homeownership a little easier. The Federal Housing Authority (FHA) loan has more accessible requirements than many traditional bank loan products. However, accessibility comes with more nuanced qualifying requirements. It can be challenging, especially for first-time home buyers, to understand the loan process. Atlas Crown Mortgage is an honest and transparent mortgage broker who works with borrowers to understand and move through the loan process with ease.
Here are five things many new borrowers don’t know about FHA loans.
You receive an FHA loan through a traditional lender.
While backed by the Federal Housing Authority, a traditional lender provides the loan, meaning the borrower will need to go through the loan application of a bank or other mortgage lender. It would be more straightforward if first-time homebuyers could use a single application portal. Because you need to evaluate different lenders, it's crucial to work with an experienced mortgage broker to find the lender who offers the best rate and terms.
Unfortunately, the loan application process can be complicated to navigate for first-time homeowners. Atlas Crown Mortgage is an experienced mortgage broker who strives to make FHA loans more straightforward and beneficial for our clients.
The home must be your primary residence.
One of the most significant restrictions on FHA loans is that borrowers can't use them for investment and rental properties. The backing from the Federal Housing Authority makes the path to homeownership easier for people without large down payments. The tradeoff is that you have to occupy your home within 60 days of closing.
If you're interested in growing a real estate portfolio with rental properties, other loan products will better fit your needs. The mortgage brokers with Atlas Crown Mortgage have a nationwide network of lenders to match their clients with the ideal mortgage, even if it's not an FHA loan.
Your credit score affects the down payment requirement.
The other benefit of an FHA loan is that you don't necessarily need a high credit score to get approved for the mortgage. However, lenders can set their minimum credit score for loan approval. An FHA loan requires a 3.5 percent down payment if you have a credit score of 580 or higher.
Some lenders will accept a credit score between 500 to 579 if you can put 10 percent as a downpayment.
Every FHA loan also requires mortgage insurance.
An additional expense many first-time homeowners aren't aware of is mortgage insurance. It's a requirement of the FHA loan that protects the lender if the borrower can't make their mortgage payments.
In general, mortgage insurance lasts for the life of the mortgage unless a borrower's downpayment is 10 percent or more down. In those cases, the insurance lasts for 11 years. Borrowers can also refinance later if they want a new loan that doesn't require mortgage insurance.
Annual mortgage insurance premiums generally range from 0.45 percent to 1.05 percent of the total loan amount.
Atlas Crown Mortgage provides expertise to first-time homeowners throughout the loan process.
We founded Atlas Crown Mortgage out of our frustration with how complicated it can be to get through the loan application and closing. Our goal is to streamline the process so that first-time homeowners can purchase homes more efficiently than ever before. We work with clients to ensure they don't get trapped in untenable situations with predatory lenders and unfair contracts. The FHA loan process doesn't have to be stressful. When you have an ethical, experienced mortgage broker who works with you, it's straightforward finding the ideal loan product for your situation.
Reach out to the Atlas Crown Mortgage team to work with a qualified broker to be by your side through the loan process.