Today's Best FHA Rate
Low interest rates
Down payment options as little as 3.5%
Fast close – 14 to 21 days from contract to keys
Can use gift funds for down payment & closing costs
Minimum credit score of 500
Minimum down payment of 3.5%
Higher debt-to-income ratios allowed
Primary residences only
What is an FHA loan?
With less stringent underwriting guidelines, FHA loans are very popular among first-time buyers, and this loan program pairs well with Homepad’s fast 14-day closing timeline.
What is FHA Mortgage Insurance?
- FHA mortgage insurance is composed of two parts: an Upfront Mortgage Insurance Premium (UFMIP) that is traditionally financed into the loan, and a monthly Mortgage Insurance Premium (MIP) paid each month.
- The Upfront Mortgage Insurance Premium is equal to 1.75% of the loan amount.
The monthly Mortgage Insurance Premium is based on an annual rate of 0.45% to 1.05%, depending on the loan amount and down payment.
We often have buyers use FHA financing to get into their homes with the lowest down payment possible and refinance into a conventional loan once they reach 10-20% equity in the property. This will allow them to reduce their monthly payment significantly, or eliminate the mortgage insurance completely.
Debunking the Stigma of FHA Loans
The more lenient requirements associated with FHA financing are meant to encourage first-time homeownership. Additionally, these lenient guidelines allow Homepad Lending to close FHA loans in as fast as 14 days!
Who are FHA loans best suited for?
620 is the minimum credit score required for conventional financing, but with multiple “risk factors” (high debt ratios, low down payment, etc.) you may not be able to receive approval for conventional financing with a score below 700. FHA financing will allow credit scores as low as 580.
If you have a lower down payment.
FHA financing lets buyers put down as little as 3.5%. To help cover the additional costs of obtaining your loan, you can opt for a higher rate and take a large lender credit to help offset closing costs, instead of paying for these out of pocket.
If you are considering buying a multi-family residence.
FHA loans are also useful if you are targeting 2-unit properties, as the 3.5% minimum down payment is far lower than the 15% down needed for conventional duplexes. For 3-4 unit properties, the 3.5% minimum down payment also applies, but these properties are required to meet a “cash flow” requirement, which can be hard to satisfy in today’s market.
If you have an appraisal shortfall.
FHA financing offers a strong alternative for buyers who encounter an appraisal shortfall and wish to restructure their loan. Going from a higher down payment requirement with conventional financing to a 3.5% down payment can free up funds to cover an appraisal shortfall.