The FHA loan is often mistaken for a first time home buyer program in the Portland area. This is because it is a program OFTEN used by first time buyers, but anyone can qualify for the FHA mortgage!
The reason why FHA is so common is that it is simply the easiest loan to qualify for. If you think of mortgage programs as a “box” to fit into, the FHA program has the biggest box of all. Need a low down payment? – FHA has you covered! 3.5% minimum down payment required! And the source of funds for that down payment can come from many sources: gift funds from a family member, down payment assistance programs, employer grants, retirement funds, and many more options.
Another hallmark of the FHA loan program is that you can still qualify, even if you have a bad or complicated credit history.
The FHA technically has no credit guidance. This sometimes creates confusion for the diligent internet researcher. If you go to the HUD website that lists out all of the rules for qualifying for the FHA loan, you might find that one can have a very bad credit score, and that is not a barrier to entry. However, that HUD FHA program is specifically for that FHA INSURANCE – and the loan still needs to come from lending companies. So even though the FHA rules don’t limit the credit, the lending environment has a floor of 580 for the FHA loan program, which is still quite flexible! The FHA forgives! The FHA allows!
The Federal Housing Administration wants more Americans to buy a house, so let’s all do our part for Uncle Sam.
In addition to working for buyers with low credit scores, the FHA also allows for borrowers with NO credit score to qualify. There are some additional ‘alternative credit hoops” to jump though, but that is fairly simple.
One thing to keep in mind about the FHA is the way the mortgage insurance is paid. The FHA collects its money in two ways:
- The upfront FHA Funding fee
- The monthly FHA mortgage insurance.
Every year, the FHA assesses their risk exposure to future defaults, and makes adjustments to the required cost for these fees. Presently, the upfront FHA funding fee is 1.75% of the loan amount. The good news is that this fee does NOT come out of pocket, but is actually financed into the loan balance. But as such, this takes a bite out of your equity compared to the low down payment conforming alternative.
Our process will help you compare your options and figure out which financing plan will put you in the best financial position.