FHA Mortgage Loans: Premiums and Qualifications

Posted by Max Ruby on September 30th, 2021

When it comes to easily accessible loans, FHA loans are among the most regarded conventional loans. Its popularity has reached so far grassroots because these loans need low down payments and minimum credit scores to qualify. 

FHA loans are mortgage benefits insured by the Federal Housing Administration but backed by the government. Statistics show that FHA loans are beneficial to the most first-time house or home buying.

Arizona FHA loans are characterized by fixed interest rates, including payment terms such as fifteen years and thirty years. The terms also take a mile, and in most cases, they require the borrowers in FHA loans to pay mortgage insurance. The function of mortgage insurance is to cover the lender in case of loan default by the borrowers.

But in most cases, mortgage insurance premiums are needed when borrowers are subjected to making less than 20% as a downpayment. For the payment of mortgage insurance cover, there are two premiums that FHA loan clients have to pay, they include;

Annual premium: It includes paying from 0.45% to 1.05%. The percentage payment is affected by the repayment period, i.e., 15-30 years.

Upfront premium: This is only applicable to be paid if the borrower gets the loan and requires beneficiaries to pay 1.75% of the total amount of the loan.

Qualification for FHA loans

For you to qualify for FHA loans, meet the following requirements;

1. You must have bank statements, stubs, and federal tax returns documents for income verification.

2. You must have proof of two of last year\'s employment records.

3. Your monthly mortgage payments history should not exceed 31% of the GMI.

4. If you are under bankruptcy, wait for more than one year, then apply for the FHA loan.

5. The ratio of your back-end debt shouldn\'t exceed 43% of GMI.

6. The property you are engaged to buy should meet the HUD protocols, be appraised, and be approved by the FHA authority.

7. Your FICO rate should range between 500 and 579 and alongside a down payment of 10%. If your FICO is above 579 and more than 3.5% as a downpayment, you can qualify for FHA.

FHA loans are among the best conventional loans for first-time homebuyers. Qualifying for the FHA loans is easy, only if you meet all mentioned above requirements.