FHA Loans at Park 65 Lending

An FHA loan (Federal Housing Administration loan) is a government-backed mortgage designed to help homebuyers qualify with lower credit scores and smaller down payments compared to conventional loans. However, it’s notable to mention that you do not have to be a first-time homebuyer to use an FHA loan. At Park 65, we have found FHA loans are a useful tool for borrowers of all credit scores because we can often get better rates on FHA loan vs. conventional loans. As such, when you are only putting down 3.5%, we like to compare the two options for you to see which one is more affordable.

Key Benefits of FHA Loans:

1. Lower Down Payments: FHA loans typically require as little as 3.5% down, making homeownership more accessible.

2. More Lenient Credit Requirements: FHA loans are more forgiving when it comes to credit scores. While a score of 580 or higher is usually needed for the 3.5% down payment option, individuals with lower scores may still qualify with a larger down payment.

3. Expanded budgets: Because FHA loans are more forgiving on overall debt loads, borrowers in tighter financial positions can typically get more house with an FHA loan than a conventional loan.

4. Competitive Interest Rates: FHA loans often offer lower interest rates than conventional loans, which can save borrowers money over the life of the loan.

5. Competitive Mortgage Insurance: Mortgage insurance costs have come down over the years, which has led to smaller overall monthly payments on newer FHA loans than was possible in the past.

6. Refinancing Options: FHA loans offer streamlined refinancing options, which doesn’t require any income underwriting. This makes refinancing a breeze compared to a conventional loan.

7. Condos and Manufactured Homes are Allowed: FHA loans can be used for 1-4 unit properties, condos, and manufactured homes.

Who Should Consider an FHA Loan?

FHA loans are ideal for:

• Homebuyers who may have limited savings for a down payment

• Buyers with lower credit scores who may have difficulty securing a conventional loa,

• Homebuyers who may not have a large income but are still looking to purchase a home

• Individuals looking for a streamlined and less complicated refinancing process

Random Tidbits on FHA Loans

• Appraisals are still required on FHA loans, and they require certain safety features, such as smoker detectors in every bedroom and within 10 feet of the kitchen, handrails on the stairs, and no missing paint on the interior and exterior of the property.

• Even though you don’t have to be a first-time homebuyer to use an FHA loan, you cannot have more than one FHA loan at a given time unless you meet very specific criteria.

• If you’re trying to use an FHA loan to buy a second house, you cannot use an incoming tenant’s rental income from the house you’re vacating to help qualify for the new house’s mortgage. This would be allowed on a conventional loan, however.

• FHA loans are stricter on using income from second jobs on the mortgage application; the second job must be held uninterrupted for two full years.

• An FHA loan on a condo will require condo approval by HUD, the governing body of the FHA loan. This is something we help borrowers complete in advance of closing.

• 3-4 unit properties are hard to do on FHA because 75% of the potential rental income from all the units must be at least as great as the sum of the mortgage, property tax, homeowner’s insurance, and HOA dues. For this reason, we usually look for conventional loans as our loan of choice for 3-4 unit properties.

Is an FHA Loan Right For You?

FHA loans are a great option for many borrowers, especially those with lower down payments or reduced income. However, every financial situation is unique. To determine if a FHA loan aligns with your needs, call a Park 65 Lending loan officer today.