FHA Mortgage Loan Options
We’re here to help you in all of life's moments, like buying your first home. One of the best options as a first-time home buyer is an FHA loan. We partner with the Federal Housing Administration (FHA) to offer FHA loan options, which are government-insured loans with low down payments. Contact one of our experienced lenders to help find the right FHA loan for you.
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Understanding FHA Loans
Securing a loan can be difficult for low-income individuals, but FHA loans seek to make
financing easier to obtain. An FHA loan is money that you borrow from a private lender but includes backing from the Federal Housing Administration in case of a default.
The FHA's backing makes it possible for you to qualify for a larger loan, even with a low income, meaning these are great first-time home buyer loans. FHA loans feature either 15-, 20-, 25- or 30-year terms with fixed interest rates.
When you obtain an FHA loan, you'll have to pay an up-front premium equal to a percentage of the loan — usually 1.75%. You'll also pay a monthly insurance fee that loops into your mortgage. The sum of the monthly payments adds to 0.45%-1.05% of the home's value. The monthly payment will be eligible for cancellation after 11 years if you're able to put at least 10% down when you purchase the home.
FHA Loan Benefits
While you'll pay upfront and monthly premiums, you'll access a loan when you may not have otherwise been able to. We'll consider you for an FHA loan even with a low credit score, previous bankruptcy or minimal funds available for a down payment.
Plus, you'll benefit from low closing costs. The FHA only allows lenders to charge 3%-5% in closing costs. Sellers, lenders or builders can cover up to 6% of closing costs to help you complete the purchase. In any case, it's possible to roll a majority of your closing costs into the loan.
You can qualify for an FHA loan in many situations, even if you've purchased a home in the past.
Here's a summary of what you'll need to qualify for an FHA loan:
- A valid Social Security number.
- Proof of U.S. residency.
- Employment verification such as pay stubs or tax returns spanning the last two years.
- A mortgage-to-income ratio of 31% or lower or below 43% when including other debts.
- If putting 10% down, a FICO score of 500-579.
- If putting 3.5% down, a FICO score of 580 or above.
- Property appraisal through an FHA-approved appraiser.
- No bankruptcy within 1-2 years of your application.
- No foreclosure within three years of your application.
FHA Loan Features & Requirements
What makes an FHA loan unique is that it’s built specifically for a first time home buyer so that affording your first home loan is possible. There are even FHA-approved condos if that’s the route you’d like to go. We offer two types of FHA loans – purchase and refinance.
Most FHA loans have the following features:
- Insured by the Federal Housing Administration (FHA)
- Down payments as low as 3.5%
- FHA loans come with a 15, 20, 25 or 30-year term
- FHA loans have a fixed interest rate
Here's some more important information to know:
- Higher debt to income ratio (in excess of 45%) is possible with positive loan factors
- Tailored to borrowers with lower credit scores
- No income limitations
- First Time Homebuyer Counseling in generally not required
- Borrower(s) must pass Credit Alert Interactive Voice Response System (CAIVRS) clearance - no delinquency claims for any federal related debt (i.e. - student loans or government backed mortgage debts)
- Non-Occupant co-signers are acceptable if they are the Borrower’s family member defined by HUD
- Condominium financing available if the project appears on HUD’s approval roster
- Manufactured Housing is permitted dependent on certain criteria
- Less stringent credit guidelines regarding collection accounts on credit
- More forgiving seasoning requirements regarding foreclosure and bankruptcy
- Non-credit qualifying Streamline Refinance
- No appraisal required
- Loan amount cannot exceed original FHA loan amount
- Credit score is required, and only all mortgage debt is required to be provided on credit report
- A net tangible benefit to the Borrower must apply
- No maximum CLTV (Investor overlays may apply)
- Maximum amortization period is limited to lesser of remaining amortization period of the existing mortgage plus 12 years OR 30 years
- Rate and Term Refinance
- Permits a higher LTV at 97.75% provided the Borrower has occupied subject for at least 12 months. Conventional max LTV is 95%
How are FHA loans different than conventional loans with mortgage insurance?
Monthly Mortgage insurance (MMIP) on FHA loans are for the life of the loan. Also, FHA loans have upfront mortgage insurance premium in a lump sum plus the MMIP, whereas Conventional products contain mostly monthly insurance payments.
Mortgage Calculators for FHA Loans
Mortgage calculators are a wonderful tool to help you gauge what your first home will cost and how long it will take you to pay off your first mortgage. We have several types of mortgage calculators to help you know just what you can afford when you’re ready to buy your first home. You can even determine what you would need to do to pay off your mortgage early. We’ve included a few links below to specific mortgage calculators.
Which Mortgage is Better for Me?
We're here to help you throughout the entire process.
Mortgage Checklist - what to be mindful of before starting the mortgage process
5 Pitfalls to Avoid - practical tips for being best positioned for your mortgage
FHA Success Story - what matters when you're buying a home for the first time
Apply for an FHA Loan
At First Commonwealth Bank, we're passionate about making homeownership a reality for
individuals and families at every income level. We invite you to apply for an FHA loan online today or request an appointment to discuss your financial situation with our team.