Everything You Need to Know About FHA Loans

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    Today I wanted to shed some light on FHA loans. As a buyer, what do you need to know about them? This is important information for sellers as well.

    Today, we’re seeing a record number of buyers using FHA loans rather than conventional loans, but the public still doesn’t know much about them or has misconceptions. The first misconception is that the FHA guarantees the loan, but that’s not true. The FHA insures the loan, which removes or minimizes the default risk that a lender faces when a buyer purchases a home with less than 20% down.

    For buyers, the FHA limit in high-cost areas is about 115% of local median prices, which is not to exceed $625,000. At risk of getting too deep into some confusing numbers, the easiest thing to remember is that the maximum conforming loan limit for a home is $417,000.

    An FHA loan is a great option for home buyers who have had some trouble in the past, too.

    If your credit score is less than perfect, you may still qualify. Your FICO score can even be less than what conventional loans require. If you’ve had a bankruptcy, you can still qualify for an FHA loan about two years after discharge.

    FHA loans are a great option for first-time home buyers and low-to-moderate income buyers.

    If you had a foreclosure in the past like many folks have, you can still buy a home, provided that your credit score has been excellent for two years or more since the foreclosure.

    For sellers, it’s important for you to know that repair demands for FHA loans are a lot less demanding than they were years ago when they were very excessive. In fact, they were so excessive that sellers would completely shy away from FHA loans if they were on a contract. Current demands are less excessive and more reasonable for sellers to work with.

    Overall, FHA loans are a great way to go for first-time home buyers as well as low-to-moderate income buyers. There really aren’t income restrictions to FHA loans, so anyone can use them.

    If you have any questions about financing a home or you’re thinking about buying or selling in the Jersey Shore market, give me a call or send me an email. I’d be happy to help.

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