Have you ever considered buying a home in Texas, but then decided against it, thinking that you won’t qualify for a mortgage? Are you worried that your credit score will affect your loan’s chances for approval? Do you think you don’t have sufficient money saved up to cover the costs?
Read on. The Texas FHA loan could be the answer to your dream of becoming a homeowner.
What is an FHA loan?
The FHA or Federal Housing Administration loan is a government-insured mortgage program. The backing of the U.S Department of Housing and Urban Development (HUD) made this initiative possible.
To improve the housing situation throughout the United States, the FHA stimulated the housing market by giving people with marginal credits and low incomes a better chance of qualifying for a home loan. Because the government backing protects the lenders from the risk of borrowers defaulting on their payments, FHA-approved mortgage institutions are able to issue mortgages with less stringent requirements to hopeful applicants.
The Advantages of an FHA Loan
Qualifying for an FHA loan is relatively easy. The three main criteria are the credit score, source of income, and the required down payment.
- Credit Score
If your credit rating is one of the factors that keep you from trying for a mortgage, with the FHA loan you don’t have to trouble yourself too much about that. A credit score of 580 is enough to get approved; some lenders even deliberate applicants with ratings between the 500 – 579 range.
- Source of Income
Another advantage of the FHA loan is that there is no set salary minimum to qualify. However, one vital factor in securing the loan is a stable employment history. You must be a legal resident of the U.S.A, with a valid social security number. Moreover, you should be able to prove that you have been working in the same company for at least two years.
- Down Payment
Compared to the 5% to 20% down payment required by most conventional loans, FHA-backed mortgages only necessitate the borrowers to a 3.5% upfront payment. What more? There are available grants and down payment assistance for first-time homebuyers.
The Disadvantages of an FHA Loan
Despite its many appealing features, the FHA loan still poses some disadvantages in certain aspects.
- Property Standards
Borrowers need to meet specific structural and safety standards to get a house approved for an FHA loan. An FHA-approved appraiser will check whether the property qualifies for the minimum habitation conditions. If it doesn’t, the owner or the borrower has to perform the necessary renovations and improvements before the loan gets granted.
- Insurance Premium
Perhaps, the biggest setback of the FHA loan is that it requires you to pay for two mortgage insurance premiums (MIP). You have to pay the first insurance upfront. The other is charged monthly, on top of your mortgage responsibilities. Furthermore, your insurance obligation will last through the entire term of the loan. Unlike conventional loans, borrowers will have to continue paying for the insurance even after 20% of the debt is covered.
Like everything else, the Texas FHA loan has its share of pros and cons. If you want a better and more thorough insight into the nature and specifications of the credit, search for the top FHA loans Texas and the most recommended FHA-approved lending firms in town.