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FHA loan

Learn what an FHA loan is and who it supports.

Discover the benefits of an FHA loan.

Find out the requirements to qualify for an FHA loan.

What is an FHA Loan?

FHA home loans are government-backed mortgages insured by the Federal Housing Administration (FHA).

The Federal Housing Administration is not a mortgage lender. Instead, they guarantee payments if ever the borrower defaults on the loan.

Most first-time buyers opt for an FHA mortgage loan because it requires lower credit scores and a reasonable minimum down payment.

HOW DO FHA LOANS WORK?

FHA mortgages are issued through FHA-approved lenders. This loan program is popular because it supports low- to moderate-income borrowers who do not qualify for a conventional mortgage loan or those who are not able to put a 20% down payment.

 

However, since FHA mortgage borrowers are deemed to have a higher risk of default, they'll be required to pay for a mortgage insurance premium (MIP). This coverage is meant to protect the lenders in case the borrower is unable to make a timely monthly payment or stops making payments altogether. FHA home loans  involve two mortgage insurance premiums: upfront and annual.

 

Upfront mortgage insurance premium (UFMIP) is equal to 1.75% of the loan amount. This is a one-time fee the borrower would have to clear at closing. For example, if you borrow $250,000, your UFMIP would be $4,375.  Alternatively, you can opt to add this cost to your mortgage balance.

The annual MIP rate

On the other hand, can be between .45% to 1.05% depending on the length of the mortgage terms (15 years or 30 years), the mortgage amount, and the initial loan-to-value (LTV) ratio. The amount would then be divided by 12 and paid monthly. The annual MIP will be calculated every year and will be incorporated into your monthly mortgage payments. 

 

How long you'll pay the annual MIP will depend on your down payment. If you can give a 10% or higher down, you'll pay the annual MIP for 11 years. But if your down payment is less than 10%, you'll have to pay the MIP for the life of the loan.

WHAT ARE THE BENEFITS OF AN FHA LOAN?

Due to their flexible requirements, FHA mortgages are easier for borrowers to obtain. Here are other big advantages that you can get from this home loan:

Low Credit Score Requirements

With an FHA mortgage, you don't need a perfect credit score. The program allows a minimum score of 500, which is lower compared to other loan programs. Typically, a conventional mortgage would require a minimum credit score of 620, USDA home loans need a 640, and a VA loan requires at least a 580 credit score.

First-time Homebuyer Friendly

The FHA loan program is insured by the federal government and offers flexible qualification guidelines created specifically for first-time homebuyers. And with the help of mortgage brokers, the loan process would also be less stressful.

Low Down Payment

With FHA home loans, you can purchase a home with as little as a 3.5% down payment with a credit score of at least 580. If your score is 500 to 579, you will have to give a 10% down payment. However, FHA mortgages allow gift funds from acceptable donors if you don't have enough cash.

Closing Cost Options

When you buy a home, you will be responsible for certain out-of-pocket expenses, such as loan origination fees, attorney fees, and appraisal costs. However, FHA mortgage loans allow the seller, home builder, or lender to pay some of these closing costs for you. If the home seller is having a hard time finding a buyer, they might just offer to help you out on the closing costs as a deal sweetener.

FHA LOAN QUALIFICATIONS

FHA loan eligibility is often perfect for first-time homebuyers since the program was created with them in mind. But even if you are no longer a first-time buyer, the requirements for the FHA program make it a very tempting option for some. To obtain this mortgage, FHA requires the following primary components:

500 credit score

Even with just a 500 credit score, you can already be eligible for an FHA loan.

3.5% down payment

A minimum down payment of only 3.5% is required if your credit score is 580+.

No Homeownership

No previous homeownership in the last 3 years

Primary residence

The home you are buying with an FHA loan must be your primary residence for the next 12 months.

front-end debt ratio

The portion of your money that goes to housing expenses (front-end debt ratio), should not be over 31% of your gross monthly income. In some cases, mortgage lenders may allow up to 40%.

back-end debt ratio

Your mortgage, plus all other monthly debt expenses, cannot be over 43% of your gross monthly income. However, some FHA mortgage lenders may allow up to 50%.

Stable employment

You must show a stable employment background history, or proof that you have been working for at least 2 years with the same employer.

income verification

You must show your income verification through pay stubs, bank statements, and federal tax returns.

PROPERTY APPRAISAL

FHA mortgage lenders require a home appraisal for two reasons. One is to estimate the market value of the property and the second one is to know if the property is eligible for financing.

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WE WORK WITH THE MOST POPULAR MORTGAGE PACKAGES

Selecting the right mortgage loan is very important. As mortgage brokers we make sure you get the best deal available for your home loan.

Conventional Loan

No PMI required with a 20% down payment.
Can be used for a wide range of property types.
Higher loan limits than some government-backed programs.
Flexible loan terms with adjustable-rate and fixed-rate options.
Learn more

VA Loan

100% financing available with full VA entitlement.
No private mortgage insurance required (PMI).
No prepayment penalty.
Guaranteed by the government.
Lenders have limitations.
Loans are assumable.
Learn more

FHA Loan

Low minimum credit score of 500.
Government-insured Loan program.
Flexible qualification for first-time homebuyers.
3.5% down payment with a credit score of 580+.
Closing costs could be paid by the seller, home builder, or lender.
Learn more

USDA Loan

0% down payment or lower down payment than other loan products.
Low private mortgage insurance (PMI).
Easier qualifying requirements for those with lower credit scores.
Can finance 100% of the home's purchase price.
Learn more

FREQUENTLY-ASKED QUESTIONS

What will disqualify me from an FHA loan?

Typically, an FHA mortgage lender prefers a FICO® Score of at least 580. Still, it's possible for you to get an FHA loan with a credit score of 500.
Other reasons that could disqualify you are having a DTI of more than 43% or the inability to afford the closing costs and down payment.

What is the FHA mortgage limit in Tampa, Florida?

For the year 2022, the loan limit for a single-family house in Tampa is $420,680.

Can I refinance an FHA loan?

Those who already have an FHA mortgage can benefit from refinancing. FHA mortgage refinance can allow you to take advantage of lower interest rates or take cash out of your home's equity. However, you need to have your current FHA loan for at least 210 days and have a history of on-time payments for the previous six months.

What is the difference between FHA and conventional loans?

Generally speaking, an FHA loan is easier to qualify for compared to a conventional mortgage. With an FHA loan, you'll be paying for MIP for the life of the loan if your down payment is less than 10%.

 

With a conventional loan, the PMI (private mortgage insurance) will automatically cancel once you reach 78% of your home's purchase price.

 

Learn more about the differences between FHA and conventional home loan programs  here.

What is the mortgage rate for FHA loans?

Because it is government-insured, an FHA mortgage program has a lower interest rate than a conventional loan. However, lenders will have different interest rates from each other. So it's best to compare FHA mortgage lenders and choose one that suits your needs best.

Are FHA loans just for first-time homebuyers?

This is a misconception. FHA mortgages are available for anyone who qualifies. But since it has more relaxed requirements, the majority of the applicants are first-time home buyers.

Can I qualify for an FHA loan with a high DTI?

Typically, the required DTI for an FHA loan is 43%. But some mortgage lenders accept a DTI of 45-50%.

Can I qualify for an FHA loan if I had a bankruptcy?

With a Chapter 7 bankruptcy, you are eligible for an FHA mortgage two years after discharge. However, you need to build up good credit and avoid taking in more debt within those two years.
With a Chapter 13, you need to show proof of at least one year of payments to your payment plan. Your documents should show that you've made your payments on time and that you have permission from the court to enter the loan transaction.

How long do FHA loans take to close?

Generally, an FHA loan process can take about 30-60 days, from application to closing. This is because it requires actions from third parties such as appraisers, home inspectors, and attorneys. Working with a mortgage broker can make the process more manageable since they'll be doing most of the paperwork for you.

Does FHA offer down payment assistance?

FHA does not offer down payment assistance, but other DPA programs can assist you with the down payment. Alternatively, the down payment can be gifted by your parents or another family member.

Can you use an FHA mortgage on investment properties?

Unfortunately, you cannot use an FHA loan on investment properties. However, you can purchase a multi-unit property in Tampa FL with an FHA mortgage. And as long as you live in one of the units, you can then rent out the other dwellings.

How can Ebenezer Mortgage Solutions help with my Tampa FHA mortgage application?

Working with our mortgage broker can get you access to multiple loan programs from different lenders without having to do the leg work. With our experience in the mortgage industry, we can answer any questions you might have regarding Tampa FHA mortgage and help you understand which one would suit best based on your financial needs and situation.
Have the home of your dreams with the FHA advantage. Call Ebenezer Mortgage Solutions today to get started.
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