FHA loans are a great way for potential buyers to become homeowners that otherwise might be edged out of the housing market. These loans are in place to help buyers with less down payment capital, low credit, and other more lenient borrowing parameters. The Federal Housing Administration backs FHA loans in order for buyers to not be tied to the strict rules of more conventional programs.
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Let's cover the basics of FHA loans. Of course, each client and property is different, so be sure to continue working with a great loan officer in order to serve each unique situation.
- FHA loans are NOT just for first time buyers, but they do make great first time buyer loans.
- Minimum credit score required is 500 (but always check with your lender)
- The buyer must have two credit accounts
- Down payments as low as 3.5% qualify
- 50% or less debt to income ratio required
- Mortgage insurance is required with these loans
- There are limits depending on what area the home is in for how much an FHA loan can be for.
Several different types of FHA loans are out there to help buyers. However, here are some the most common FHA loan types:
- Fixed Rate Loans
- Adjustable Rate Mortgages
- FHA 203 Loans
- FHA Jumbo Loan
So, a loan officer is best choice when it comes to diving deep into any loan program and how best to serve clients.
Helping Clients
Agents must educate their clients on all possibilities. The best agents share all options upfront. Also, clients probably know little about loans in the first place. Mortgages really are an area for many that seem scary and difficult to understand.
These loans really do offer flexibility when it comes to securing a loan, which is why agents should be well versed in them. If your client needs a co-borrower/signer, or recently had a foreclosure - an FHA loan might be a great fit for them. The same goes for if your client recently filed for bankruptcy. Especially in life during/after the height of the COVID-19 pandemic, a lot of people's financial situations have swung from both levels of extreme. While this level of change and uncertainty aligns with the times, it could make buying a home very difficult. Insert three wonderful letters of hope: F, H, and A.
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