FHA Home Improvement Loans
Get an FHA loan and benefit from a low down payment mortgage program with less stringent borrower requirements.
The Federal Housing Administration (FHA) loan is a solution to the problem for buyers who cannot always get a regular loan.
An FHA loan is a low down payment mortgage secured by the Federal Housing Administration for the purchase of your first home. FHA loans help families become homeowners by lowering the cost of financing and reducing the disincentive down payment. According to Mortgage Reports, approximately 20% of eligible buyers apply for an FHA loan and receive it due to moderate credit and income requirements.
The Federal Housing Administration (FHA) was created by the US Congress in 1934, and in 1965 it was incorporated into the system of the Department of Housing and Urban Development (HUD). At the time of its establishment, the construction industry was stagnant. About 2 million workers in the industry were unemployed, the requirements for potential borrowers were very strict, and only 2 out of 5 families had their own housing.
FHA lending programs helped make a difference in the 1940s by providing housing finance for veterans and retired military personnel. Over the next thirty years, the Federal Housing Administration helped build millions of homes and apartments for low-income Americans. Since then, FHA loans have been one of the most sought-after loan programs among families with a high debt-to-income ratio and low income.
Credit FHA: Criteria
- FICO score 580+
- Down payment – 3.5%
- There is no requirement for the availability of reserves for issuing an opinion of the automatic system for assessing solvency in relation to one or two real estate objects
What are the benefits of an FHA loan?
An FHA mortgage is a great option for a first-time homebuyer with a low score or limited down-payment. The waiting period for FHA loans for borrowers with a credit history of defaults, such as bankruptcy, foreclosure or “short sale”, is shorter than the term for conventional loans, provided that such borrower has restored its creditworthiness… The Federal Housing Authority allows relatives who will not be living in the property they are purchasing to act as co-borrowers to help the borrower meet the requirements.
FHA loan limit
At the beginning of each year, the FHA reviews the FHA loan limits. In 2019, base caps increased from $331,760 to $314,827. FHA loan limits may vary by city, county, or state.
|Purchase cost||Down payment||Maximum loan amount|
|$343 790||3,5%||$331 760|
|$414 700||20%||$331 760|
FHA loans: reduced down payment
The minimum down payment on FHA home loans can be as low as 3.5%. These mortgages are secured by the Federal Housing Administration. This is a great option for first-time buyers or families with modest down-payment funds.
FHA loan costs
In the mortgage lending process – whether it be an FHA loan or any other loan – there are commission costs and fees. These are mortgage costs. FHA loan costs are approximately 3-4% of home value and may vary from state to state due to higher taxes. Some down payment assistance programs may offset some of the mortgage costs associated with an FHA loan.
Mortgage insurance and FHA loans
An FHA loan can only be used if you have insurance. The first insurance premium is a preliminary one-time payment under the mortgage insurance contract, which is included in the loan amount and usually amounts to about 1.75% of its size. The second insurance premium is the annual mortgage insurance premium paid on a monthly basis; the premium is determined based on several factors, including the loan-to-collateral ratio. The annual installment is paid in 12 equal installments, which are included in the monthly payments on the loan.
Affordable FHA Loans
1. Refinancing loan provided in a simplified manner
FHA’s simplified refinancing loans can reduce the number of documents that must be submitted to the borrower and the duration of the assessment of his/her solvency because in this case, there is no verification of information about jobs or income. Some basic requirements:
- The refinanced loan must be secured by the Federal Housing Administration;
- The mortgage loan must not be in arrears in payments;
- Refinancing should be aimed at reducing payments to the borrower, including interest;
- For mortgage loans refinanced in a simplified manner, cash is not paid;
- No cost estimate is made.
2. FHA Loan 203 (k)
FHA loan 203 (k) is a mortgage that includes repairs. FHA home improvement loans can be used for the purpose of renovation or extension of premises, or for the purchase of old housing in need of major repairs. According to FHA 203k lenders, some of the loan conditions are:
- Down payment 3.5%;
- Minimum score 640;
- Income statement for 2 years;
- Checking the amount of income;
- No overdue payments in the last 12 months.