The Benefits of Using FHA Loan When Buying a House in Arizona
Home buyers today don’t often buy homes with 20% down payment. Low and no down payment mortgages remain popular for buyer today. One of the most popular low down payment mortgage program is the FHA loan. So, what are the benefits of using an FHA loan to buy a house in Arizona? What advantages does this program has to offer? Read on the benefits of FHA loan.
What is an FHA Loan?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). It’s important to note that the Federal Housing Administration doesn’t actually lend you money for a mortgage. Instead, you get a loan from an FHA-approved lender, like a bank, and the FHA guarantees the loan.
Small Down Payment
One of the greatest benefits of FHA home loans is the low 3.5% down payment, which is much lower than other mortgage programs. However, borrowers must pay mortgage insurance premiums, which protects the lender if a borrower defaults.
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FHA Credit Score Requirements
Borrowers with a credit score between 500 – 579 required a minimum down payment of 10%. However, it is not likely mortgage lenders will approve you with a score below 580. If a borrower has a 580 credit score the minimum down payment is 3.5%.
Higher DTI
Your debt-to-income ratio is a major determining factor in how much you can borrow. The amount you spend on monthly loan payments should be relatively low, compared to your monthly income. Typically, FHA – Maximum DTI is 45%. But in some cases, it’s possible to get approved with D/I ratios closer to 50%.
FHA Interest Rate
FHA loan interest rates are typically are lower compare to conventional loan interest rate.
Down Payment Grants for FHA Loans
Paying the upfront costs of buying a new home can be challenging. To help overcome this hurdle, there are several down payment assistance programs in the form of grants or second mortgages available in Arizona.
Down Assistance Payment Program for Buying House in Phoenix AZ
Gift for Down Payment
It is easier to use gifts for your down payment and closing costs with FHA financing. The down payment of 3.5% can be a gift, as long as the person gifting the down payment meets FHA guidelines.
Seller Paid Closing Cost
Sellers can pay up to 6% of the loan amount toward a buyer’s closing costs. You’re most likely to benefit from that in a buyer’s market. Even in strong markets, you can potentially adjust your offer price enough to entice sellers.
FHA Streamline Refinance
If you have an FHA loan you may be eligible to refinance your mortgage under the FHA streamline program. The great thing about these refinances is that they do not require a credit check or income verification. This allows everyone to refinance their FHA loan to get a lower interest rate and lower monthly mortgage payment.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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