The Federal Housing Authority accounts for about one out of every eight homes sold each year, according to Inman.com. Contrary to popular belief, FHA loans are NOT restricted to lower-income home buyers or first-time home buyers. FHA loans have no income or age requirements. Knowing the following seven facts about FHA loans can help you decide if FHA is right for you.
1. Homeowners don’t have to pay FHA mortgage forever. 210 days after your FHA mortgage clears or six months of on-time payments, you can refinance to a conventional mortgage.
2. You can qualify for an FHA mortgage two years after a bankruptcy or three years after a foreclosure.
3. Borrowers with credit scores as low as 580 can qualify for FHA financing.
4. FHA loans typically have lower interest rates than conventional loans, although that is not guaranteed.
5. Investment properties, second homes and high end properties won’t qualify for an FHA mortgage.
6. FHA is tough on deferred student loan debt. It requires that one percent of that debt is included in your Debt-to-Income calculation.
7. Borrowers with better credit scores are better off with a conventional mortgage. Borrowers with credit scores below 640 will pay more a month for private mortgage insurance than FHA. Borrowers with credit scores over 760 will pay at least $69 a month less with private mortgage insurance.