California FHA Mortgage Loans
If you’re looking to buy a home but don’t have the traditional 20% down payment, you may be wondering if there are loans that can help you with your purchase. The answer is yes! One of the best options on the market is the Washington FHA loan. This type of loan is insured by the Federal Housing Administration, allowing borrowers to put down as little as 3.5% of the purchase price and making it an ideal choice for first-time homebuyers. If you’re thinking about applying for a Washington FHA mortgage, make sure to contact LBC Mortgage for a free consultation.
How do Washington FHA loans work?
The FHA was created in 1934 and its purpose was to provide lenders with insurance on loans made to borrowers with a down payment of 50%. Later on, the down payment was reduced to as little as 3.5%. This allowed more Americans to buy homes, which helped to spur economic growth. The program was eventually expanded to allow for 30-year terms, making it more affordable for borrowers. In recent years, the FHA has been increasingly used by first-time homebuyers and continues to be an important source of lending for renters looking to buy a home.
FHA loans are available for both purchase and refinance transactions. Since the FHA is a government agency, there are income and credit requirements that must be met. So, to qualify for an FHA loan, you must have lived in your home for at least a year as your primary residence. There are also some more requirements to be met:
- Be a U.S. citizen or legal permanent resident,
- Have a valid Social Security number,
- Have steady employment and credit history.
- You will also need to provide proof of income, asset, and employment information.
FHA mortgage loan benefits in Washington
FHA loans offer several benefits that can be extremely helpful for borrowers. Here are the most essential ones to consider:
1. Low down payment
Borrowers can put as little as 3.5% down on a home making it much easier to save up for a purchase.
2. Flexible credit requirements
Another benefit is that Washington FHA loans have flexible credit requirements. It means that borrowers with credit as low as 500 may still qualify for a loan.
3. Low-interest rates
FHA loans offer lower interest rates than other types of loans, which can save borrowers a significant amount of money over the life of the loan.
4. No prepayment penalties
Many loans come with prepayment penalties, which can add up if you decide to pay off your loan early. However, FHA loans do not have prepayment penalties, so borrowers can save even more money by paying off their loans early.
5. Reduced closing costs
FHA closing costs can range from 2% to 6% of the cost of your property, but borrowers often benefit from reduced closing costs. Some lenders offer discounts on closing costs for FHA loans, so compare offers before selecting a lender.
FHA Loan VS. Conventional Loan
There are several important differences between FHA loans and bank statement loans in Washington. Perhaps the most significant difference is that FHA loans are backed by the federal government, while conventional loans are not. This means that if a borrower defaults on an FHA loan, the lender is protected against loss by the government. In contrast, if a borrower defaults on a Non-Qm loan, the lender is not protected against loss and may suffer significant financial damage.
Another key difference is the level of scrutiny that each type of loan undergoes. FHA loans are subject to much more stringent underwriting standards than conventional loans, meaning that borrowers must meet very specific criteria to qualify.
Credit score requirement is another factor that differentiates an FHA loan from a conventional one. Conventional mortgages typically require a minimum credit score of 620, but if your score is lower, you may still qualify for an FHA loan. FHA loans are more lenient than conventional ones, and only require a credit score of 580 to put down a 3.5% down payment. However, if your credit score is below 580, you’ll need to put down at least 10%.
Regardless of what type of loan you’re looking for, it’s important to plan your mortgage journey beforehand. By doing so, you’ll increase your chances of getting approved for the loan that’s right for you.
Apply For an FHA Loan in Washington
If you’re thinking about buying a home in Washington, consider FHA loans. At LBC Mortgage, we’re experts in FHA loans and we’ll help you determine if this program is right for you. Our Washington mortgage broker will guide you through the entire process and answer any questions. So if you’re ready to take the first step toward homeownership, give us a call today!
Frequently Asked Questions About FHA Mortgage
No, you don’t need perfect credit to qualify for an FHA loan. You need to have a credit score of at least 500 to qualify. Even if you have had a bankruptcy or foreclosure in the past, you may still be eligible for an FHA loan.
If you’re considering an FHA loan, pay attention that borrowers have to pay two insurance premiums which adds to the total sum of expenses. The UFMIP is worth 1.75% of the loan amount, while the MIP ranges between 0.45% to 1.05% of your loan amount. Nevertheless, while both premiums are required, you may be able to get a discount on the MIP if you have a good credit score or if you make a large down payment.
The minimum down payment required is 3.5%. It can come from your savings, a gift from a family member, or a grant from a state or local government program.
There are limits on how much you can borrow based on your income and the median prices in your area. FHA loan limits have been increased for all counties in Washington. In response to rising home prices, the Department of Housing and Urban Development has raised the limits for 2022, with some counties seeing an increase of over $100,000. The new FHA limits range from $420,680 to a staggering $891,250