FHA Loans: What you need to know
Property ownership is often thought of as synonymous with the American dream itself. There is only one problem. As National Public Radio reported in July 2016, more and more young people are finding it harder than ever to get their foot on the proverbial property ladder.
Thankfully, FHA loans can help.
Minimum FHA Down Payment Incentives
FHA home loans are loans which are backed by the Federal Housing Administration. Targeted at encouraging lenders to make financing available to people with poor credit, FHA loans in Texas directly serve first-time buyers, as well as other groups underserved by conventional home financing options.
Are you struggling to put money aside for a down payment on your first property? if so, one of the biggest incentives of FHA loans stems from the fact that FHA down payment requirements can often stand at as little as 3.5% of a property’s overall market value.
Should I get an FHA Home Loan?
If you have poor credit or little in the way of existing capital, FHA home loans are a fantastic way to realize your dreams of homeownership. This is because FHA loan providers will allow you to use money gifted to you (as well as money from other sources) for your FHA down payment. Even better, some states offer dedicated FHA down payment grant assistance.
Of course, there are potential pitfalls when it comes to FHA home loans. Ongoing monthly insurance fees of 0.85% can make FHA loans in Texas much costlier than many more conventional financing options. This being the case, if you have a credit score of 700-800, it is definitely worth weighing the benefits of conventional financing against different FHA home loan options.
FHA Max Loan Amount & Qualification Requirements
FHA max loan amounts vary from state to state. According, however, to a statement from the Department of Housing and Urban Development, maximum FHA home loan amounts in high-cost areas currently stand at $636,150.
Of course, there are certain restrictions on who can apply for an FHA home loan. As a rule, as well as an FHA down payment of 3.5%, applicants also need to have a FICO credit score of at least 580. At the same time, FHA home loans can only be used to purchase property which will be used as a person’s primary residence, not a second or vacation home.
FHA loans are often celebrated as the best way to help people and families with poor credit secure home financing. There are, however, several conventional financing alternatives to FHA loans in Texas. Such alternatives include VA loans insured by the Department of Veterans Affairs, traditional mortgages backed by private (rather than federal) insurance, and unsecured home loans which use down payments of 20% or more as collateral against the risk of people defaulting on future loan repayments.