things you need to know about fha loans

6 Things You Need to Know About FHA Loans

Because FHA loans are government backed, they have attractive interest rates and less stringent requirements. FHA home loans are becoming a more and more popular choice for first time home buyers who are new to the home buying world. Check out these 6 things you need to know about FHA loans and see if this is the right fit for you.

Find Out More About FHA Loans

You Don’t Need Perfect Credit

One of the most attractive things you need to know about FHA loans, is that you don’t need perfect credit to qualify. With traditional conventional loans, you need a 680 to qualify. For a FHA loan with a down payment as low as 3.5%, the credit score must be 580 or higher. This allows more and more buyers to qualify for a mortgage.

Minimum Down Payment

For most borrowers, and those who have a 580 score or higher, the FHA only requires 3.5% down. This allows borrowers to use their savings to make a down payment, and not have saved 20% of the purchase price. A common practice is to use a tax return as part of the down payment as first time homebuyers generally get money back for their returns. This is one of the most important things you need to know about FHA loans since credit is the common reason people don’t think they can afford a mortgage.

Closing Costs May Be Covered

The FHA allows home sellers, builders and lenders to pay some or all of the closing costs. For example, if a borrower uses a builder’s preferred lender when buying a home, they may cover a portion of the closing costs. Additionally, some lenders will offer a closing cost gift as a thank you for using their services.

The Lender Must be FHA Approved

Because the FHA is an insurer and not a lender, borrowers must get their FHA home loan through FHA approved lenders. These lenders have different rates and costs, even for the same loan. So it’s important for borrowers to shop around when deciding on a lender.

The 2 Types of Mortgage Insurance

Upfront premium: 75% of the loan amount, paid when the borrower gets the loan. The premium can be rolled into the financed loan amount paid in monthly or bi-monthly payments.

Annual premium: 45% to 1.05%, depending on the loan term (15 or 30 years), the loan amount and the initial loan to value ratio. Then the premium amount is divided by 12 (for 12 months of the year) and paid monthly.

No Maximum or Minimum Income Requirement

Despite common misconceptions, there are no maximum or minimum requirements when it comes to qualifying for a FHA loan. This means both low and high income home buyers can take advantage of the program. While there are no income limits, there are DTI (debt-to-income) limits that the applicant must abide by, like any other loan type.

You might also like: A Quick Comparison of Conventional vs. FHA Home Loans


Yes, we do! If you’d like to know more about FHA loans, we invite you to contact the Guild Mortgage Tacoma branch team. We’ll be happy to answer your questions so you can determine whether this type of financing might be right for you.


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