What is an FHA loan?
An FHA loan is money insured by the Federal Housing Administrationto try and help first-time buyers purchase their dream home. Not only are they considered to be one of the easiest loans to apply for, but they also only require a down payment of 3.5 percent – far less than other options on the table.
An FHA loan in Denver also comes with added benefits such as flexible credit options, assumption options, and deferment options. In essence, they are a valid loan program for most first-home buyers looking to secure their place on the property ladder.
However, FHA loans do have some guidelines the borrowers need to follow. The competitive down payment rate of 3.5 percent is valid only for those with a credit score of more than 580. What’s more, insurance premiums can be higher than other loan options which helps to protect the lender if the borrower defaults. As a rule of thumb, the lower the credit score, the higher the interest rate.
The FHA loan’s creation came after defaults and foreclosures in the 1930s. The Federal Housing Administration wanted to find a way to not only help lenders get enough insurance but to stimulate the housing market and provide first-home buyers with a better chance of becoming a homeowner.
What Are the Benefits of FHA Loans in Denver?
- You don’t have to have stellar credit to get approval
- Deposits can come in the form of family gifts
- Down payment is only 3.5 percent if your credit score is 580 or above
- Flexible credit options
- Less strict credit criteria
- Flexible term loans
- Generous loan limits
- You can negotiate limitsabout your income and deposit
- It’s a helpful first step for first-home buyers
Another significant advantage of an FHA loan in Denver is having an assumable mortgage. While there are many home loan options on the market, there are very few that are assumable – meaning other people can take over your mortgage. An assumable mortgage enables you to essentially sell your mortgage by allowing someone else to take over the home loan from your lender with few or no changes in the terms. The buyer of the mortgage has to make all the future loan repayments as if they were the ones who agreed to the FHA loan in Denver in the first place.
Bankruptcy and Foreclosure
What’s more, FHA loans give those who have been made bankrupt or foreclosed on, a second chance. It can take several years to get your life and finances back on track after a foreclosure or bankruptcy – even if it was one event such as a medical bill or family death that caused the financial stress in the first place. While several banks may turn you away, an FHA loan is one loan program that enables you to get your life back on track quicker.
As long as you can show your credit is on the up and up, you can be eligible for an FHA loan in Denver within two years of bankruptcy and within three years of a foreclosure.
Am I Eligible for an FHA Loan in Denver?
It’s important to note that 5280Lend always goes the extra mile to secure Federal Housing Authority loans for customers. However, as they come with a range of strict criteria, it is not always guaranteed. We’ve included a few of these criteria below.
- Minimum FICO score of 580 (negotiable, or 10 percent deposit)
- Steady employment history
- Lawful residency with social security number and legal age
- 5 percent down payment – may include family gifts
- Primary residence only
- FHA-approved property appraisal
- Total house-related payments less than 31 percent of your income (or negotiable up to 40 percent)
- Mortgage + living costs less than 43 percent of gross income (or negotiable up to 50 percent)
- At least two years post-bankruptcy withgood credit
- Three years out of foreclosure with good credit
- The property must meet particular standards