If you want to become a homeowner in Arizona, there are high chances that you may consider applying for an FHA home loan. This mortgage financing option can be beneficial, especially if you’re a first-time homebuyer and your financial or credit position isn’t great.
What’s an FHA Home Loan?
This is a Federal Housing Administration (FHA) guaranteed loan. The FHA is responsible for compensating the lender on any defaulted loan and isn’t involved in the loan application process. The application can be done through regular mortgage lenders. However, these lenders must be FHA-approved.Criteria for Eligibility
To qualify for an FHA home loan, the following aspects should be met: a) You should have a credit score of at least 580. b) You need a down payment of 3.5% of the lesser of purchase price or property value. c) You must have a debt to income ratio equivalent to 43% or less. The amount of money you qualify for will depend on your location and the kind of home you want to purchase. FHA loans also have limitations on the kind of property you can purchase. You’re limited to purchasing a property without safety and structural issues.Pros and Cons
Just like other Arizona home loans, FHA home loans have their advantages and downsides, as explained below:Pros
– Favourable borrowing terms like lower interest rates The requirements to qualify for an FHA loan are much easier compared to standard home loans. – No limitations on income You can qualify for an FHA home loan with any income level. In some cases with other low down payment programs, it isn’t easy to qualify if your income exceeds the area median income.Cons
* Limitations on how much you can borrow FHA home loans have strict borrowing limits, which means that you might not get your dream home. * Minimum property standards You can’t acquire a property with safety or structural issues using an FHA home loan. * You need a down payment Although the 3.5% down payment might be low, the low-income earners might face difficulties raising it. * Primary residences only * FHA charges an upfront funding fee added to the loan balance and a monthly mortgage insurance fee In conclusion, these are the pros and cons of FHA home loans. These Arizona home loans can be used to purchase a new or improve the existing home.Latest Articles
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