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Borrowers who have a low credit score or can't afford a large down payment may want to consider an FHA loan. Backed by the Federal Housing Administration, these mortgages have a lower minimum down payment and more lenient credit requirements.
FHA mortgage rates vary by lender, so it's best to shop around to find the best mortgage lenders based on your financial profile. Here are the current FHA mortgage rates.
An FHA loan is a government-backed mortgage loan that helps those who may not be able to afford a larger down payment or otherwise qualify for a conventional mortgage. These tend to have lower income and credit score requirements -- lenders generally accept applications with FICO? Scores as low as 580. Plus, FHA loans allow borrowers to pay as little as 3.5% down, depending on their creditworthiness. Additionally, part or all of a borrower's down payment can come from generous family, friends, employers, or charities in the form of a down payment gift.
Borrowers will need to pay for FHA mortgage insurance regardless of their down payment amount. This entails paying both an upfront premium and a monthly premium. The upfront premium is 1.75% of the base loan amount. The monthly premium is based on factors such as your loan amount and terms, but can range from 0.15% to 0.75% of your loan amount. This figure is then divided into 12 monthly payments and included in your mortgage payment.
You'll also want to decide which mortgage term is best for you. FHA loans can be repaid over 15 or 30 years. Both terms come with fixed rates, so your interest rate, and thus your monthly principal and interest payment, will never change.
Next you should get quotes from a variety of lenders, as their interest rates and fees may vary. Find ones that offer prequalification, since that won't have an effect on your credit score. FHA mortgage insurance premiums are generally the same no matter who you go with.
Once you have your quotes, be sure to compare the APRs. The APR will reflect both the interest rate and any fees you'll pay.
Have an FHA mortgage you're looking to refinance? Check out our guide to learn more on FHA refinancing.
FHA loans tend to be the best fit for home buyers who can't qualify for a traditional mortgage. This could be because they were turned down due to their credit profile or because they can't afford a higher down payment.
You can qualify for an FHA mortgage with a credit score as low as 580, and some lenders will consider you for these loans if your credit score is above 500 and you bring at least a 10% down payment.
If you have a lower income, an FHA loan is a great option. You only need to put together a down payment of 3.5%. Lenders may also be more flexible when it comes to factors such as your debt-to-income ratio, which helps lenders determine whether you can take on an extra loan payment.
However, you will need to pay two types of mortgage insurance premiums. If you choose to wrap your upfront PMI into your mortgage, it could increase the overall amount of your home loan. If you have a high credit score and can afford a large down payment, it might be best to consider other types of mortgages to avoid paying these premiums.
An FHA loan is a mortgage issued via a government-backed loan program that helps lower-income borrowers who may have smaller down payments or people with lower credit scores qualify for home mortgages.
To find the best mortgage rates for an FHA loan, you'll need to shop around with different lenders that are approved by the Federal Housing Administration.
If you are unable to qualify for a traditional mortgage, an FHA loan may be a good option. Generally, these loans are best for first-time home buyers who cannot afford to make a large down payment.
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