Are you looking to buy a home? Chances are you have reviewed some mortgage choices or plan to start soon.
Many borrowers in the Dallas area look at an FHA loan. These loans help many buyers qualify for a mortgage.
Want to discover if an FHA loan makes sense for you? Here are some factors to consider.
Higher Mortgage Loan Limits
An FHA loan gives you access to higher mortgage loan limits. The FHA raised their 2022 loan limit to $647,000.
A higher mortgage loan limit reduces your minimum down payment. You can get a house with less cash.
We’ll illustrate this with an example.
Last year, the conventional loan limit was $548,250. If you wanted to buy a home for $650,000, you would have needed to put down $101,750. This down payment gets you to the mortgage loan limit.
Under the new rules, you only need to make the minimum 3% down payment. The 3% down payment puts the mortgage loan below $647,000.
A 3% down payment of $650,000 comes to $19,500. You pay 1/5th of the down payment and still get the house.
Higher limits make an FHA loan more enticing. You are less likely to need a jumbo loan to complete your purchase.
Lower Credit Score Requirements
Some home buyers feel limited by their credit score. Not everyone can qualify for a conventional loan.
You can increase your credit score over time. However, raising your credit score takes time. You may miss out on the home of your dreams because your credit score is too low.
This problem comes up less often for an FHA loan. You can make a 3.5% down payment with a credit score of at least 580. If you make a 10% down payment, you can get in with a credit score of at least 500.
A conventional mortgage comes with a stringent credit score requirement. You must have a credit score of at least 620 to qualify for these loans.
You need an even higher credit score to make a lower down payment. Lenders will want to see a credit score above 740 for a lower conventional loan down payment.
Would you rather get a 10% down payment on a 500 credit score or wait until you bring it up to 740? The FHA loan provides quicker access to a house.
You Can Refinance Later
An FHA loan comes with mortgage insurance premiums. These premiums often last for 11 years or the lifetime of the loan.
You also pay mortgage insurance on a conventional loan. However, these payments go away once you build up 20% equity.
You can take out an FHA loan now and refinance it later. A refinance will save you money once you reach 20% equity and build up your credit score.
An FHA mortgage gives you access to the immediate upside. You can later compensate for the insurance premiums through a refinance.
Want an FHA Loan for Your Texas Home?
Most homebuyers need a mortgage to finance their investment. An FHA loan presents many advantages. You get to own a home sooner and with a lower down payment.
If you want an FHA loan in Texas, we can help. We also offer a free online calculator so you can compare loans. Apply for an FHA loan today.