FHA and First Time Homebuyers
Advantages of an FHA Home Loan
The FHA loan is the most popular government-backed home loan in the country. These low down payment loans are made by qualified lenders and guaranteed by the Federal Housing Administration (FHA).
FHA loans require just a 3.5% down payment for borrowers with a 580 credit score or higher. For homebuyers with less-than-perfect credit, FHA loans offer additional significant benefits. The government backing means average FHA interest rates are typically lower than average rates for conventional mortgages.†
Borrowers with credit scores as low as 500 can qualify for an FHA loan with a 10% down payment. Guidelines and policies will vary by lender.
This historic home loan program continues to open the door to homeownership for millions of Americans who might struggle to secure conventional financing.
LOW DOWN PAYMENTS
FHA Loans are popular among homebuyers wanting a low down payment. You may be able to get FHA financing with as little as 3.5% down.
LOWER INTEREST RATES
FHA homebuyers with credit scores of 680 can often qualify for the same interest rate as conventional borrowers with a score of 740.
FHA Loans don't require perfect credit to secure financing. In some instances, you may qualify for 3.5% down with a 580 credit score.
FHA loans allow sellers to pay up to 6% of the loan amount to cover buyers’ closing costs. Sellers can only pay up to 3% on conventional loans.
Conventional and Jumbos
What is a conventional mortgage?
A conventional loan is a type of mortgage that isn’t backed by a government agency, such as the Department of Veterans Affairs. Conventional mortgages often meet the down payment and income requirements set by Fannie Mae and Freddie Mac, and conform to the loan limits set by the Federal Housing Finance Administration, or FHFA.
You'll generally need a credit score of at least 620 to qualify for a conventional loan, though a score that's above 740 will help you get the best rate. Depending on your financial status and the amount you're borrowing, you may be able to make a down payment that's as low as 3% with a conventional loan. (Although be aware that a higher down payment may help get you a lower rate.)
What is a jumbo loan?
A jumbo loan is a mortgage used to finance properties that are too expensive for a conventional conforming loan. The maximum amount for a conforming loan is $548,250 in most counties, as determined by the Federal Housing Finance Agency (FHFA). Homes that exceed the local conforming loan limit require a jumbo loan.
Also called non-conforming conventional mortgages, jumbo loans are considered riskier for lenders because these loans can’t be guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults. Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms.
No Tax Returns Needed Primary Residence
What is a no-income-verification mortgage?
A no-income-verification mortgage is a home loan that doesn’t require standard income documentation (including paystubs, W2s or tax returns) for approval. The lender allows you to use other items, such as bank statements, to show that you can repay a mortgage.
No-doc mortgages were more commonly known as stated-income loans before the housing crash of 2007 and 2008. These loans were popular for self-employed borrowers, as they could essentially “state” whatever income was needed to qualify.
Variations of these types of loans include:
- SISA. Stated-income, stated-asset loans are made without verification of a borrower’s income or assets. Stated-income loans are no longer available.
- SIVA. Stated-income, verified-assets loans are those for which lenders accept your assets as the basis for approval. They’re often called “bank statement loans.”
- NIVA. No-income, verified-assets loans are similar to SIVA loans, except income is not added to the application.
- NINA. No-income, no-asset loans have made a comeback, but they’re only available for real estate investors buying rental properties. This type of no-doc mortgage requires enough rental income to cover the new mortgage payment.
- NINJA. No-income, no-job, no-asset loans don’t require lenders to verify income, assets or employment. Essentially, with a NINJA loan, the lender takes the borrower’s word that the loan application is accurate.