• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Education
  • Career
  • Investment & Money
  • Accounting & Taxation
  • Transportation & Logistics
  • Industries

Business Finance Articles

Your First Financial Choice....

  • Business
  • Commerce
  • Management
  • Insurance
  • Banking Finance
  • Marketing & Advertising
  • Tech

Things to know about FHA Loan Eligibility

Last Updated on January 29, 2021 By Quratulain Merchant Leave a Comment

All families, either rich or poor, deserve a safe and beautiful home. In the United States, this can happen even if you have very little savings. The Federal Housing Administration is an agency in the United States established by President Franklin Delano Roosevelt. Currently, the FHA has insured about 8.5 million single-family mortgages, more than 11,000 multifamily mortgages, and over 3,900 mortgages for hospitals and residential care facilities. 

Table of Contents

  • What is FHA Loan?
  • Terms and Condition you need to follow to get FHA Loan Approval
    • FICO Score
    • DTI should be less than 50
    • Property Approval
    • Mortgage Insurance
    • Other Factors
  • Pros and Cons of FHA Loans
    • Pros of FHA Loans
    • Cons of FHA Loans

What is FHA Loan?

FHA, or Federal Housing Administration, is the largest insurer of residential mortgages in the world. It has assisted millions of people since its creation in 1934. The striking thing about FHA loan is that they have a down payment policy of as low as 3.5%. 

FHA loan is beneficial for those people who are first time home buyers or those who don’t have enough money saved for a down payment. What’s more, FHA loan can not only make a home, but renovate an existing home, or replace an existing mortgage with a new loan. 

Terms and Condition you need to follow to get FHA Loan Approval

There are many terms and conditions for FHA loans. It is vital to know all aspects of applying for the FHA loan.

Let’s have a look in detail.

FICO Score

FICO stands for Fair Issac Corporation. It is a data analytics company which determines by analysing different consumer credit files from various credit bureaus. If the FICO score is at least 580, you qualify for the 3.5% down payment.

However, if the score is between 500 and 570, you are competent for a 10% down payment. In other words, the higher the score, the more chances of getting a low down payment. 

DTI should be less than 50

DTI or Debt-to-Income Ratio is a personal finance measure that compares the amount of dept to the amount of overall income. In other words, it is a measurement of the ability of the payments you can make each month to pay off the loan. Likewise, a low number of DTI indicates a better chance to avail of the FHA loan. 

Property Approval

The FHA loan makes sure that the investment is an excellent choice. Hence, they require the borrower to meet the set property approval.  

Mortgage Insurance

The borrower needs a Mortgage Insurance Premium for the eligibility of an FHA loan. It protects the lenders from losses that result from defaults on home mortgages.

Other Factors

Furthermore, FHA loan determines other factors such as the borrowers’ downpayment history, bankruptcies, foreclosures, and the ability to pay the loan timely. Thus, it is crucial to keep a check on all your factors before applying for the loan.

Pros and Cons of FHA Loans

FHA loan can surely help many families avail their dream home. However, there is always the downside of every insurance policy. Hence, it is important to weigh both positive and negative aspects of the insurance policy before taking the suitable decision. 

Pros of FHA Loans

  • A very low down payment – FHA loan requires a minimum FIC score of 580. It means that there is a high chance of achieving a low down payment of 3.5%. 
  • Allows Payment Assistance – The FHA loan permits its borrower to pay the down payment from an approved source like a friend or a close relative with proper terms and conditions. Keep in mind that not all conventional loans allow this policy.
  • Low credit of 500 allowed – If your credit history is not so smooth, you might want to consider an FHA loan as the credit score is as little as 500.

Cons of FHA Loans

  • Limit of the Loan – The FHA loan limits the borrowed amount based on the location of homes. It might be a setback for some if you are considering living in a high-end area. 
  • Mortgage insurance can be expensive – Surely, the down payment low in the FHA loan, but the premium mortgage insurance might cost you an arm. Precisely, the one-time premium is generally equal to 1.75% of the home purchase price. Furthermore, this can be financed through the mortgage or paid in cash but not allowed to have both options. Additionally, the annual premium depends on your loan amount and loan to value ratio.
Quratulain Merchant

A content mother, a former student of Hisham Sarwar, and a professional SEO blogger on multiple niche giving services at Fiverr.

Filed Under: Banking & Finance Tagged With: FHA, Loan, USA

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I accept the Terms and Conditions and the Privacy Policy

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

What is micro-lending?

“Poverty is unnecessary” Mohammad Yunus. Although … [Read More...] about What is micro-lending?

What Is HMO Licensing and Why Is It Popular With Landlords?

HMO or house of multiple occupancies is essentially a … [Read More...] about What Is HMO Licensing and Why Is It Popular With Landlords?

Is 2021 the year to Improve Business Sustainability?

Businesses are starting to invest in green materials, … [Read More...] about Is 2021 the year to Improve Business Sustainability?

How is the Car Market Expected to Perform in 2021?

2020 was clearly a year to forget for the automotive … [Read More...] about How is the Car Market Expected to Perform in 2021?

6 Ways To Improve Your Business’ Delivery Process

In most cases, when a company receives an order, they … [Read More...] about 6 Ways To Improve Your Business’ Delivery Process

Business School Essay Tips for Successful Studies

Applying for a business school is not a cinch. Every … [Read More...] about Business School Essay Tips for Successful Studies

How has Brexit Impacted the UK Economy?

The historic deal on the UK's future trading and … [Read More...] about How has Brexit Impacted the UK Economy?

Invoice Generator For Freelancers: A How To Guide

Becoming a freelancer is probably one of the most … [Read More...] about Invoice Generator For Freelancers: A How To Guide

Which Video Maker Tools Are Best for Beginners?

One of the new trends in marketing is that people are … [Read More...] about Which Video Maker Tools Are Best for Beginners?

How Can You Save More on Merchant Processing Overcharges

Merchant servicing is one of the branches of financial … [Read More...] about How Can You Save More on Merchant Processing Overcharges

The Importance of SEO Rankings for eCommerce

Appearing in the top few search results is the most … [Read More...] about The Importance of SEO Rankings for eCommerce

How Can You Save More on Merchant Processing Overcharges

Merchant servicing is one of the branches of financial … [Read More...] about How Can You Save More on Merchant Processing Overcharges

3 Ways Business Intelligence Helps Telecommunications

To say telecom enterprises generate massive data on a … [Read More...] about 3 Ways Business Intelligence Helps Telecommunications

Importance of LOGO in Business

Every minute in this globe, business revolutionists are … [Read More...] about Importance of LOGO in Business

Risk vs. Reward: The Wise Way to Invest

Every good investor has a strategy. You wouldn't apply … [Read More...] about Risk vs. Reward: The Wise Way to Invest

Benefits and Drawbacks of HughesNet

It’s so difficult these days to find a stable internet … [Read More...] about Benefits and Drawbacks of HughesNet

Minimum Wage in Virginia

Most companies and corporations are confined to meet … [Read More...] about Minimum Wage in Virginia

Expert Tips in Marketing Your Business

Are you thinking of starting your own Limited Liability … [Read More...] about Expert Tips in Marketing Your Business

ELSS VS PPF: Which Investment Option is Better For You

As both ELSS and PPF schemes help an investor to save … [Read More...] about ELSS VS PPF: Which Investment Option is Better For You

8 Intriguing Education Fields for Creative People

Most people grow up and have a good idea of what they … [Read More...] about 8 Intriguing Education Fields for Creative People

Most Viewed

Advertising Business Growth Business Ideas Business Needs Business Tips Career Advice Career Development Career Guide Career Options COVID-19 Credit Card credit card reviews Debt Management Differences Employee Entrepreneurship HRM Import-Export Importance Investment Loan Provider Loans MCQs Online Marketing Organization Pakistan Partnership Past Papers Payday Loan Payday Loans PPSC Production Pros Cons Quick Money Tips Roles and Duties Startups Strategies Students Help Tips Top10 Types UK UK Banks University USA

Recent Comments

  • Nighat on PPSC MCQs: Curriculum Development
  • Muhammad Shan on PPSC MCQs: Pakistani Education Policies MCQs
  • IRSHAD AHMED on PPSC MCQs: Curriculum Development
  • Anpan Bismark on PPSC MCQs: Curriculum Development
  • Anpan Bismark on PPSC MCQs: Curriculum Development
  • Aisha on PPSC MCQs: Curriculum Development
  • Hat on Successful Small Business Ideas 2021
  • Nikki on PPSC MCQs: Curriculum Development
  • SAAMI JAWAID - on What are trade meaning, nature, and different types of trade?
  • Sahar jabeen on PPSC MCQs: Curriculum Development

Footer

  • About US
  • Contact Us
  • Blog
  • Comment Policy
  • Terms & Conditions
  • Privacy Rights
  • Privacy Policy
  • Follow on Google News
  • Follow on Facebook
  • Follow on Twitter
  • Follow on Medium
  • Entrepreneur Skills
  • Business Cycle
  • Business Ideas
  • Speculator
  • Be Wealthy
  • Psychology in HRM
  • HRM in Business
  • Businessman Qualities
  • Salespeople Types
  • Health & Business
  • Business Success Rules
  • Stress At Work
Copyright © 2018 BFA - DMCA.com Protection Status .