FHA loans are more popular now than they have been for years. With mortgage lenders tightening their standards and requiring larger down payments, the 3.5% down payment required for an FHA loan seems down-right generous. Additionally, many mortgage lenders are more willing to lend if you can get a loan insured by the Federal Housing Administration.
Before you finalize your paperwork, consider these four things you should know about FHA mortgage loans:
1. Any income qualifies
Many government programs are limited to those with lower incomes. An FHA loan, though, is available to anyone with any limit. Even though who make millions can qualify for an FHA loan. The overriding factor in FHA loans is the ability to pay. So you will have to prove that you can afford your mortgage payments.
While your income may not be subject to a limit, the house you purchase is. The maximum home loan in most real estate markets is $271,050. However, if you live in a market that is high-priced (New York or California, for example), the limit is $729,750.
2. FHA loans are easier to get
It has actually become easier to get an FHA loan. In the past, burdensome paperwork scared off homebuyers as well as mortgage loan officers.
However, the Federal Housing Administration has now provided an automatic underwriting system. Instead of closings that are much longer than more traditional mortgages, FHA loans now take only a little bit longer close. (You can also look into “streamlined” refinancing.)