FHA loans came into the market in the 1930s as a way to boost the housing market. Many years later the FHA loan has remained largely the same. With a Davie FHA loan, you can buy an average priced home in Davie with a down payment that is as low as 3.5%.
It is important to note that the government does not actually lend you the money. Instead, it insures the loan. In the event that the borrower defaults on their mortgage, the FHA steps in to reimburse the lender.
FHA loans make it possible for people who would normally not qualify for conventional loans become proud homeowners.
Below is the process borrowers planning on applying for a Davie FHA loan should follow:
- Ensure that your credit history is accurate and check if there are any errors that you need resolved before proceeding with the application.
- Get started on saving for a down payment. Unlike other conventional loans, with an FHA loan you only require a down payment that is 3.5% of the home’s purchase price. However, if you can afford a larger down payment, then go right ahead and put it down as it will cost less in the long-term.
- Get your housing budget in order. To determine how much mortgage you will be able to afford you will need to calculate the sum of your current rent as well as how much you can afford to put aside to get the down payment.
- Finally, you will need to compare loan rates between different lenders.
FHA Loan Qualification Requirements
For a borrower to qualify for a Davie FHA loan, they need to meet the requirements highlighted below:
A minimum credit score of 580 in which case the minimum down payment they can make is 3.5%. However, if the applicants have a credit score that ranges between 500 and 579, the minimum required down payment is 10%.
The 3.5% minimum down payment can come from various sources however, none of those sources can directly benefit from the transaction you are making. The down payment can be sourced from a gift, a loan, savings etc. but should not be provided by the lender, agent, or seller.
The law requires lenders to determine the borrower’s income as a way of ensuring that the borrower can afford the mortgage.
As a borrower you need to ensure that your name does not show up in CAIVRS. CAIVRS is the government’s Credit Alert Interactive Verification Reporting System. Basically it is a database of names of people who owe back taxes, have defaulted on government loans, or have other forms of federal debt.
An FHA loan cannot be used to purchase a second home or a vacation home. You can only use an FHA loan to buy a primary residence. You should know though that an FHA loan can be used to buy a primary residence for a family member.
Who can get an FHA loan
Borrowers that have a great credit history can easily get an FHA loan. Also, if the borrower is young and has not had the opportunity to build an attractive credit history, an FHA loan can help them access funding quicker than they normally would.
If you have had issues with your credit in the past but have remedied your credit score, an FHA loan might persuade lenders to be more forgiving to your situation. Click here to learn more about getting an FHA loan.
Benefits of an FHA loan
Below we have touched on some of the major benefits a borrower will enjoy by choosing an FHA loan:
- Low down payment – It can be quite a challenge to save for a down payment while at the same time paying rent, however, due to the 3.5% minimum down payment requirement, FHA loans makes homeownership affordable for a lot of people.
- Easier credit requirements – Fixing a damaged credit history can take years. With an FHA loan you don’t have to wait many years before you can borrow a loan.
- Reasonable interest rates – Typically, lenders charge borrowers with less than stellar credit histories higher interest rates. The same can be said for borrowers that make low down payments. However, due to the FHA insurance, interest rates on FHA loans remain reasonable just like they do on conventional loans.
- Choice – The FHA gives borrowers freedom on which private lender they can get their FHA loan from. This is a good thing because it makes it possible for borrowers to get the best rates after shopping around.
- Refinancing – The FHA not only helps borrowers buy homes, but it also helps with refinancing their homes. This is helpful as it can help expedite changing the borrower’s loan terms if it is ever needed.
If you would like to know more about Davie FHA loans, feel free to get in touch with Kloze.