Is An FHA Loan Right For You?

FHA loans can be a great way to get a mortgage, but many people have questions about whether an FHA loan is right for them. D. Shane Whitteker is a Williamsport mortgage expert, so we sat down with him to ask some frequently asked questions about FHA mortgages.

What is the FHA?

The FHA is an acronym for the U.S. Federal Housing Administration. An FHA mortgage loan means that the money being borrowed from a bank is insured by the government.

Can I get an FHA loan if I have credit problems?

Whether you're in Williamsport or anywhere else in Pennsylvania, an FHA loan generally requires a lower credit score than a conventional loan. There are other factors besides credit score that do effect approval for an FHA loan. It’s a great idea to speak with a mortgage broker if you have questions about becoming approved for a mortgage before you begin home shopping.

What paperwork will I need to gather to apply for an FHA loan?

• Two years of complete tax returns, W-2s, 1099s, or other income statements
• Current pay stubs
• • Self-employment will require two years of tax returns and year-to-date profit/loss statement
• Recent two months of bank, retirement, stock, and mutual fund statements
• Most recent credit information
• • If you have no credit, 12 months of 3 different utility bills will be required
• Landlord contact information
• Bankruptcy information (if applicable)
• Cosign information (if applicable)
• Driver's license, social security card, or green card/work permit (if applicable)

I live in the Williamsport area, and I'm a veteran - can I get an FHA loan?

Yes, veterans can get approved for an FHA loan. We would suggest looking at a VA loan first, but if you’re ineligible at the time for a VA loan, an FHA loan could be a good option for you.

What’s the most popular FHA loan type?

A 30-year fixed rate mortgage is the most popular FHA loan, but there are other terms available for FHA loan, just like any other loan product.

When I get an FHA loan, am I borrowing money from the FHA?

No. Your lending bank is often a private bank. The loan is insured by the Federal Housing Administration. Your payments will be to the bank.

Am I able to pre-qualify for an FHA loan in Williamsport?

Yes! Contact a Williamsport mortgage broker and discuss your home goals. With a little time and information, you could receive a pre-approval and be home shopping.

What are the FHA lending limits? Do these limits ever change?

The FHA lending limit determines the loan amount that a buyer may borrow by setting a minimum (floor) and maximum (ceiling) standard. There is no exact answer to what this amount is as the FHA lending limits are determined by county. These limits of the ceiling do change periodically but it is often an increase in the lending limit.

Are there fees associated with an FHA mortgage?

The FHA requires a 3.5% down payment to purchase your home, an appraisal of the home under FHA guidelines, and monthly mortgage insurance premium. There are other costs associated with an FHA loan, such as closing costs, homeowners insurance, mortgage insurance premium, and inspections, but these are typical costs associated with most loan products.

Another cost with an FHA loans is the cost of UFMIP, or Up Front Mortgage Insurance Premium. The one-time cost is 1.75% of the base loan amount and can be added into the total mortgage. Money from UFMIP goes into a U.S. Treasury Department escrow account where the funds are used to protect the government in case of borrower default.

How can I improve my credit rating?

There are a variety of ways you can improve your credit!

• Keep balances low on revolving lines of credit
• Pay your bills on time
• • Setting payment reminders will help!
• Pay off debt rather than moving it around
• Avoid opening a variety of new accounts
• Speak with a mortgage broker to determine your specific goals

The Bottom Line

An FHA loan is a great option for borrowers who have average to lower credit scores, but still want a competitive rate on a mortgage. Reaching out to a mortgage broker will help determine what loan product is best for your scenario. FHA loans have a bad reputation after the mortgage bubble burst in the late 2000’s, but they were not the cause of it. It’s a great loan product for anyone who doesn’t qualify for conventional or VA loans. To learn more about FHA loans, or any other mortgage loans, contact Williamsport mortgage experts Principle Home Mortgage today.