Interested In a Dallas FHA Loan? Here’s What You Need to Know
Have you ever considered buying a home in Dallas, but then decided against it, thinking you might not qualify for a mortgage?
Are you worried that your credit score might affect your chances of getting approved? Or do you not have enough money saved up to cover the costs?
Dallas FHA loans could pave the way to the realization of your dream of becoming a homeowner.
What is an FHA loan?
The FHA or Federal Housing Administration loan is a government-insured mortgage program through the backing of the U.S Department of Housing and Urban Development (HUD).
To stimulate the housing market, the FHA gives people with marginal credits and low incomes a better chance of qualifying for a mortgage through the FHA home loan program.
Because the government backing protects the lenders from the risk of borrowers defaulting on their payments, FHA-approved mortgage lenders are able to issue mortgages with less stringent requirements to hopeful applicants.
Upsides of FHA Loans
It’s not hard to qualify for an FHA loan. As long as you meet these three main criteria, your chances of getting approved are pretty high.
1. Credit Score
If your credit rating is one of the factors that keep you from trying for a mortgage, with the FHA loan you don’t have to trouble yourself too much about that because a credit score of 580 is enough to get approved; some lenders even consider applicants with ratings between the 500 – 579 range, but with a higher down payment, a higher rate and certain restrictions will apply.
2. Source of Income
There is no set salary minimum to qualify for an FHA loan. As long as you are a legal resident of the United States, with a valid social security number and a stable employment history, you have a good chance of getting approved. Ideally, you must have been working in the same company for at least two years.
3. Down Payment
Compared to the 5% to 20% down payment required by most conventional loans, FHA-backed mortgages only require the borrowers with a credit score of 580 or above a 3.5% down payment. What more? There are available grants and down payment assistance for first-time homebuyers.
Downsides of FHA Loans
Despite its many appealing features, the FHA loan still poses some disadvantages in certain aspects.
1. Property Standards
There are specific structural and safety standards that need to be met to get a house approved for an FHA loan. An FHA-approved appraiser will check whether the property qualifies for the minimum habitation conditions. If it doesn’t, the owner or the borrower has to perform the necessary renovations and improvements before the loan gets granted.
2. Mortgage Insurance Premium
Perhaps, the biggest setback of the FHA loan is that it requires you to pay for two mortgage insurance premiums (MIP). The first insurance is paid upfront while the other is charged monthly, on top of your mortgage responsibilities.
Furthermore, your insurance obligation will last through the entire term of the loan. Unlike conventional loans, it will not cease after more than 20% of the equity has been repaid.
Like everything else, the FHA loan has its share of pros and cons. If you want a better and more thorough insight into the nature and specifications of the program,, reach out to a reliable FHA advisor or lender near you.
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