FHA Loan Requirements. Many people use FHA loans because they offer mortgage loans with lower down payments. At present, FHA loans are given to help people buy homes for the first time. However, due to recent policy changes, making these loans is no longer cheap. Some prospective homeowners claim that it is difficult to reach credit because FHA loans require a credit history for borrowers.
FHA Loan Benefits
FHA is currently very popular because it provides great benefits to its users. There are FHA benefits that other lenders do not have, for example the FHA provides protection not provided by most traditional lenders. FHA loans are also insured so that lenders can provide lower interest rates. Here are the benefits that you can enjoy with an FHA loan:
Requirements made easier. When most traditional lenders require borrowers a good credit history and high credit score. FHA loans actually simplify requirements so that it is easier for prospective borrowers to fulfill them.
Competitive Interest Rates. At present many borrowers experience default, especially for subprime borrowers because of the high amount of payments and interest rates. Conversely, FHA loans offer lower interest rates so that homeowners are able to pay their debt
Lower costs. Not only can you enjoy lower interest rates but also lower costs including closing costs, mortgage insurance and others.
Bankruptcy / Foreclosure. You will usually have difficulty applying for a loan at another traditional lender if you experience bankruptcy / foreclosure. However, in an FHA loan you are still qualified to get an FHA loan. As long as you meet the requirements requested by the FHA, including improving your credit score and payment history, you can still qualify.
No Credit. For those of you who meet the requirements, FHA will offer two lines of credit. If you do not have an adequate credit history, you can try to qualify through a replacement form. FHA loans have been felt by many home buyers. FHA provides many benefits for those who qualify, so make sure you use it well.
Minimum FHA Credit Score
FHA loans for home ownership loans require a minimum credit score for a home loan of 500. However, it is still possible to get a mortgage loan without a credit score at all. It’s just that, if you don’t have enough accounts to produce a score, lenders will usually check the source of non-traditional credit and you will also be asked to make a credit report.
The FHA minimum credit score ranges from 500 to 580, USDA loans have a FICO 640 score, and suitable loans require a minimum credit score of 620. However, FHA loans make an exception, for borrowers who do not meet the minimum credit score requirements, can apply for loans if they have a reason makes sense.
Now, it’s easier for borrowers to get home loans that are supported by FHA, because the FHA Credit Score requirements fell 60 points. In the past, FHA lenders needed a minimum FICO score of 640 or better to be approved. Now, FHA loans only require a minimum FICO 580 credit score. This means, there is a 60-point increase from previous years.
Low Down Payment
Likewise FHA loans also have a 3.5% minimum down payment program – including the lowest for current home buyers. This includes flexible and tolerant guarantee requirements.
In the United States, FHA loans are an important component of the housing market and mortgage. FHA loans are the safest type of loan at the moment, because they are insured by the Federal Housing Administration and are provided to U.S. buyers.
The FHA, founded in 1934, aims to provide affordable housing for Americans. FHA is currently the largest mortgage loan insurance company in the world.
Actually, the Federal Housing Administration does not actually provide loans. The FHA only insures loans made by state banks and provides protection against defaults and losses. To get FHA protection, lenders must meet the loan standards as determined by the FHA.
In providing its services to home buyers, the FHA issues an FHA Guidelines that explain all the characteristics of loans that are permitted, as well as the applicable provisions of loans supported by the Federal Housing Administration.
For example, the FHA guideline states that home buyers must pay a down payment of at least 3.5% of the price of a home purchase. The guideline also sets limits on loan sizes supported by FHA, which vary by region. FHA loan data, as reported by Gina Pogol, Mortgage Reports Editor, mentions FHA loan limits ranging from $ 314,827 for single family homes to $ 1,397,400 for 4-unit homes.
Lenders Often Do Not Follow FHA Guidelines
In the FHA mortgage guidelines it is regulated which loans are guaranteed and not guaranteed by the FHA. However, U.S. lenders does not include FHA guidelines as set out in the letter. Lenders often impose additional restrictions that make it difficult for applicants to fulfill loan terms supported by FHA. According to FHA guidelines, lenders are not required to verify income, employment or credit scores. However, many lenders choose to verify.
Likewise related to your credit score. According to FHA rules, FHA insures home loans for borrowers who have a credit score of 500 or higher. However, in fact, many banks are reluctant to approve borrowers with a credit score of 500.
Buyers with a credit score of 500 are very likely to experience a default in the next 6 months, which will have a negative impact on the default level of the bank’s FHA, resulting in fines, penalties, and possibly, termination of the FHA insurance program.
For this reason, starting in late 2011, most banks applied a minimum credit score for FHA loans of 640. However, the minimum score was reduced. US home buyers can now obtain FHA loans with a credit value of only 580. And it is not impossible, with the improvement in the domestic economy and US housing, the minimum FHA FICO will also be reduced.