What you need to know when buying a house with FHA loan in Phoenix AZ
Home buyers today don’t often buy homes with 20% down payment. Low and no down payment mortgages remain popular with first-time buyers and repeat buyers and one of the most popular low-down payment mortgage program is the FHA loan. Read what you need to know when buying a house with FHA loan in Phoenix Arizona.
What is an FHA loan?
An FHA loan is a mortgage insured by the Federal Housing Administration. FHA loans are very popular, especially with first-time home buyers because the requirements are less strict than conventional loans. Borrowers can qualify for an FHA loan with a down payment as little as 3.5% and a credit score of 580 or higher.
FHA borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member or a grant from a state or local government down-payment assistance program.
Mortgage Insurance is Required for an FHA Loan
Because an FHA loan does not have the strict standards of a conventional loan, it requires two kinds of mortgage insurance premiums: Upfront mortgage insurance premium (UFMIP) and Annual MIP is a monthly payment. The Upfront mortgage insurance premium (UFMIP) is 1.75% of the loan amount. This premium is paid in full upfront when the borrower gets the loan or can be financed into the mortgage. The Annual MIP is paid monthly. It varies based on the length of the loan, the amount borrowed and the initial loan-to-value ratio, or LTV.
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FHA Loans are Assumable
FHA loans are generally assumable, that means the loan can be transferred to a new owner when a house is sold. The new owner can take over the FHA loan without the additional cost of obtaining a new loan. This is a big advantage for both sellers and buyers and can make it easier to sell a home. Of course, the new owner must meet the eligibility criteria for an FHA loan for it to be transferred.
Also, if you use an FHA loan to buy a house, the property will have to be appraised and inspected by a HUD-approved home appraiser. FHA loans require that the house meet certain conditions and must be appraised by an FHA-approved appraiser.
FHA Occupancy Requirement
Under FHA rules and guidelines, the property being financed must be owner-occupied. The borrower must take possession of the home within 60 days after closing. They must also live in the home for the majority of the year. The property must be used as a principal residence for at least one year.
90 Day Flip Rule
There is a 90 day flip rule for properties being sold to an FHA buyer. That means that if you are looking at a home that is owned by an investor or iBuyer such as Opendoor, Offerpad who made repairs to the home and has it up for sale, you may not be able to buy that house until that investor has owned the home for more than 90 days.
How Do You Get an FHA loan?
A lender must be approved be the Federal Housing Authority in order to help you get an FHA loan. Contact us today to speak to our lender partner.
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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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