Opening the Doors to Home Ownership
As of 2020, you can borrow up to 96.5% of the value of a home with an FHA loan. You’ll need a credit score of at least 580 to qualify. If your credit score falls between 500 and 579, you can still get an FHA loan (ask me for details and specifics). With FHA loans, your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance.
The FHA is generous with respect to gifts for down payment. Very few loans programs will allow your entire down payment for a home to come from a gift. The FHA will.
Via the FHA, your down payment can be a gift from an immediate relative (such as parents), an employer, an approved charitable group or a government home buyer program. If you’re using a down payment gift, though, you’ll need to follow the process for gifting and receiving funds.
If you already have an FHA mortgage, you have the option of an FHA Non-Credit Qualifying Streamline Refinance. This allows you to refinance without going through the usual steps. There’s no credit check, income verification or home appraisal required. As long as you’re current on your mortgage payments, have no more than one late payment in the last 12 months and no late payments in the last three months, you can be approved.
The Non-Credit Qualifying Streamline Refinance is available in either 15- or 30-year terms, and as a fixed- or adjustable-rate mortgage. Streamline rates are the same as regular FHA refinance rates.
An appraisal is required if you wish to have your closing costs added into the loan. Or you can pay a somewhat higher mortgage rate in exchange for no closing costs, with no appraisal needed.
The FHA cash-out refinance option allows homeowners to pay off their existing mortgage. The amount of money that can be borrowed depends on the amount of equity that’s been built up in the home’s value. To be eligible for an FHA cash-out refinance, borrowers will need at least 20 percent equity in the property based on a new appraisal. Equity is the difference between the current value of a property and the amount owed on the mortgage.
While an FHA loan may sound great, it’s not for everybody. It won’t help those with credit scores less than 580. On the opposite end, aspiring homeowners who can afford a large down payment may be better off going with a conventional mortgage, as they could save more money in the long run through the lower interest rates and mortgage insurance premium that conventional lenders provide.
As the Federal Housing Administration puts it, an FHA loan “won’t accommodate those who are shopping on the higher end of the price spectrum – nor is it intended to. The FHA loan program was created to support ‘low- and moderate-income home buyers,’ particularly those with limited cash saved for a down payment.”
There's a lot that goes into qualifying for a home loan. Factors such as credit score, debt, income and more play a huge part of the decision making process. Consider taking my questionnaire and we'll discuss your mortgage options.
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Copyright ©2020 Scott Buehler licensed with Veritas Funding, NMLS#252108. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Veritas Funding is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency.
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