FHA Loans Create a Path to Success as a Homeowner
FHA loans have been a long-time staple in the mortgage industry for homebuyers who are considering alternatives to conventional home financing. These government-backed mortgages have some of the lowest down payment options available and have less stringent qualification requirements than traditional loans. At Mark Avila Loans, our mortgage professionals have been helping clients secure FHA loans in Bakersfield, Sacramento, Placer County, and nearby California cities for many years. We know the pros and cons of these and other mortgage options and are here to help you make the right choice for your family. When you’re ready to learn more about FHA loans, contact us.
A Nonconventional Solution to Home Financing
FHA loans are one of several types of nonconventional mortgages. They are considered “nonconventional” because they are insured through the federal government, while “conventional” mortgages are privately insured. Though FHA loans – and other nonconventional loans – are insured in part through the government, they are fully funded through private lenders and banks just like conventional loans.
Several different government departments support conventional loans. FHA loans are insured through the Federal Housing Administration, which is an agency within the U.S. Department of Housing and Urban Development (HUD). Other types of nonconventional loans include VA loans (backed through the U.S. Department of Veterans Affairs) and USDA loans (backed through the U.S. Department of Agriculture).
What Makes an FHA Loan Unique?
FHA loans were created in 1936 to encourage private lenders to finance more clients and give a broader range of people an avenue to purchase a home. The insurance the FHA provides reduces the risk that lenders face should a borrower default, so they have more flexible approval requirements.
Although FHA loans are backed through the government, lenders select who is and isn’t approved for financing. Though requirements can vary, clients should be able to show:
- A credit score of 500 or higher (with a 10% down payment) or 579 or higher (with a 3.5% down payment)
- In some cases a more flexible debt-to-income ratio, usually 55% or lower
- Paperwork showing ability to pay for your mortgage and other monthly homeowning costs
In addition to requirements for borrowers, there are also some requirements for the property being purchased. The HUD requires that an appraiser determine the current value of the home and that the home undergoes a property inspection for health and safety. FHA loans also have limits that vary depending on where you’re purchasing a home. We can quickly tell you these limits for one- to four-unit properties for wherever in California you plan to buy.
Start Enjoying the Benefits of FHA Loans
There are many benefits to enjoy from FHA loans, including a low down payment, minimal approval requirements and flexible terms. If you would like to purchase in Bakersfield, Sacramento, Placer County, or nearby California cities, contact Mark Avila Loans. We’re here to answer your questions about FHA loans and help you prepare for success.