With 25% of mortgages now being Federal Housing Administration (FHA) mortgage loans, perhaps it’s time to think if you can use one for your mortgage. Here are some FHA loan guidelines and information that you should know.
- Sometimes, they’re the best deal in town. In the past, thanks to no-downpayment lending plans, Federal mortgage loans were largely ignored, because of their minimum downpayment of 3.5%. But with banks now asking for a 10% minimum downpayment, an FHA loan could be your only hope.
- The house should pass government standards. The house you’re aiming to buy should have passed all government safety standards and building codes. A cracked window and the like is no problem, but leaking roofs and mold are non-negotiables.
- FHA loans have faster processing now. With a new automatic underwriting system in place, Federal mortgage loans now only take a few days longer than a conventional loan. Take note, though, that FHA loans still require income and tax documentation.
- Be aware of other charges. Always check with FHA loan information and guidelines applicable to your area or market. For example, FHA loans have a 1.75% up-front fee and a 0.5% annual insurance premium for five years, until the principal balance is at 78% of the sale price or appraised home value. You should ask, too, how much of the closing charges the seller will take care of.
- Any income level is welcome. Traditionally, FHA loan guidelines have favored low-income individuals and families. But the truth is, FHA loans do not have a salary cap. What is important is that you have the ability to pay. Borrowing limits are flexible, too. In places where real estate isn’t that expensive, the maximum is around $271,050. But in expensive markets such as California, the ceiling can be around $729,750.
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