Want to buy a home now, but don’t have a lot of money saved up to put towards a down payment? FHA loans are an outstanding option for borrowers that want to buy a home with very little down payment – 3.5% vs. the traditional 20%.
FHA (Federal Housing Administration) loans have been around for over 75 years, and while the program has changed over the years, the concept remains the same. The FHA backs investor-funded loans that promote homeownership to those with limited assets or a low-to-moderate income. With an FHA loan, borrowers can put down as little as 3.5%. There is also a 1% funding fee that can be rolled into the cost of the loan, along with monthly mortgage insurance. All FHA loans can have fixed or adjustable rates and borrowers may choose a loan term that best suits their needs. Fifteen and twenty year terms are the most common.
There are no geographic or income limitations on an FHA purchase (unlike USDA) – the only limitation the FHA sets is on loan amount. There are county-by-county limitations based on the median loan amount in the area. A DNJ representative can provide more information about limits in your area. Like any loan, there are also credit score and housing/debt ratio limits put in place that determine a borrower’s eligibility to repay the loan. The standard housing/debt ratio limit is 29/41. The easiest way to know if you qualify for an FHA loan is to ask! At DNJ Gateway Bank Mortgage, we’re happy to analyze your ratios and let you know if an FHA mortgage will be a good fit for you.
Yes – there is a funding fee, but the good news is that it can be rolled into your loan amount. This is a government loan, so the fees associated with the loan are put in place to keep the program alive and funded. Additionally, FHA loans require an annual mortgage insurance fee. This fee is paid monthly and is based on the loan amount and terms of repayment. If you’re interested in purchasing a home with money from an immediate family member, you’re in luck – the FHA allows gift money on all purchases.
To discuss FHA loans with one of our knowledgeable loan officers, contact Cornerstone today! We’ve earned the trust of homeowners in the Triangle, the Triad the Outer Banks, Western North Carolina, Virginia Beach, Rehoboth Beach, the Eastern Shore of Maryland, the Eastern Shore of Virginia, and more – Let us earn yours! Cornerstone also offers mortgages in Tennessee, South Carolina, Texas, and Florida. Call today!