The FHA Loan Advantage

If you’d like to buy a home now but can’t afford a large down payment, an FHA loan may be right for you. These mortgages are an outstanding choice for borrowers who want to buy a home with a much lower down payment – 3.5% vs. the traditional 20%.

How does an FHA home loan work?

FHA (Federal Housing Administration) loans have been around for over 75 years, and while the program has changed over the years, the concept remains the same. The FHA backs investor-funded loans that promote homeownership to those with limited assets or a low-to-moderate income.

With an FHA loan, borrowers can put down as little as 3.5%. There is a 1% funding fee that can be rolled into the cost of the loan, along with monthly mortgage insurance.

All FHA loan rates can be fixed or adjustable, and borrowers may choose a loan term that best suits their needs. 15 and 30-year terms are the most common choices for FHA borrowers.

Does an FHA loan have limitations?

There are no geographic or income limitations on an FHA purchase (unlike USDA) – the only limitation the FHA sets is on loan amount. There are county-by-county limitations based on the median loan amount in the area. A DNJ Representative can provide more information about limits in your area, whether you live in Raleigh, Durham, Greensboro, High Point, Charlotte or elsewhere in North Carolina, Virginia, Georgia, Maryland, South Carolina or Florida.

Like any loan, there are also credit score and housing/debt ratio limits put in place that determine a borrower’s eligibility to repay the loan. The standard housing/debt ratio limit is 29/41.

The easiest way to know if you qualify for an FHA loan is to ask! At DNJ Gateway Mortgage, we’re happy to analyze your ratios and let you know if an FHA mortgage will be a good fit for you.

Are there any loan fees associated?

Yes – there is a 1% funding fee, but the good news is that it can be rolled into your loan amount. This is a government loan, so the fees associated with the loan are put in place to keep the FHA loan program alive and funded.

For example, you may be buying a home for $200,000. The funding fee would be $2,000, so the amount you will be borrowing is $102,000.

Another FHA loan advantage: Those interested in purchasing a home with money from an immediate family member are in luck – the FHA allows gift money on all purchases.

Learn more about the FHA loan advantage!

Call DNJ Gateway Mortgage to speak with one of our qualified mortgage brokers and discuss whether an FHA loan may be the right fit for you. With offices in Raleigh, Greenville and Wilmington, we work with homeowners and home buyers across North Carolina. DNJ also offers mortgages in South Carolina, Virginia, Maryland, Georgia and Florida.