FHA mortgage is quite a popular home loan option. The private lenders offer flexible requirements for attracting borrowers with bad credit. The Federal Housing Administration insures the loans, but they do not lend money to the buyers. The borrowers can apply for the mortgages with the FHA-approved lenders. Since the lenders are partially insured against the impending risk of default, they can approve the mortgages.
The FHA loan requirements Texas are different in comparison to conventional loans. With small down payments, low credit score, streamline refinance, and underwriting flexibility, FHA brings the much-needed relief. Now, you might have heard that the mortgage has two minimum credit requirements for the down payment options. The homebuyers carrying 500 credit scores are eligible for a 10% down payment. On the other hand, the borrowers who have at least 580 can seek the 3.5% down payment option. But nevertheless, few requirements are not usually discussed before applying for the FHA loan. Let’s have a look at the lesser-known requirements of the FHA loans in Texas.
A borrower can choose FHA loans for a primary residence. It is essential to pass the eligibility requirements for a single-family or four-unit building. The borrowers can further choose condos, but the properties need to be verified by FHA. Other things are also followed for the FHA loan property requirements, take a look below.
Do not purchase an investment property.
The property needs to be free from toxins.
The property must pass adequate living standards.
Buy a house with emergency exits.
Occupy the house within 2 months of closing.
MIP or Mortgage Insurance Premium
FHA loan requirements come with a mortgage insurance premium. An upfront mortgage premium is added and needs to be paid at closing. Additionally, there is an annual mortgage insurance premium divided equally over the monthly mortgage payment. MIP acts as a protection shield for the lender, in case of a default on the mortgage. So, it is something to keep in mind while applying for the FHA home loan.
Different from Conventional Loan Requirements
If you have attempted to apply for conventional loans, you might have noticed the difficult requirements. When the FHA loan is available for only 500 or 580 credit scores, the latter requires at least a 620 credit score. FHA mortgages also have forgiving guidelines for the borrowers with a history of foreclosures, short sales, or bankruptcies. On the contrary, conventional loans do not provide as such and are expensive for qualifying. FHA home loans offer competitive interest rates. Therefore, working-class families can afford FHA mortgages more than conventional loans.
There are other FHA loan requirements that you must follow before qualifying. You can ask the private lenders about the documentation process and other requirements. It is seen that the loan product is a preferred option for a large-scale US population. Needless to say, FHA still remains to be one of the best options to finance your future. If you require any help, give a call to your lender.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.