- FHA loans are wonderful for first-time homeowners interested in a loan option with easy qualifying and low down payment requirements. These are a type of nonconventional loan, which means the loan is insured through a division of the federal government. In this case, the Federal Housing Administration (FHA). The loans are funded through FHA-approved private lenders, who are more willing to lend to a wider variety of clients because they know the FHA will reimburse their losses in the case of default. Here, we’ll talk about the basics, benefits, and requirements for FHA loans. At Lincoln Home Loans, we help many first-time homebuyers throughout Nashville, Memphis, Clarksville, and nearby Tennessee areas, achieve their dream of homeownership through FHA loans.
FHA Loan Basics
FHA loans are one of several types of non-conventional loans. Others include USDA loans and VA loans, and each is designed to help give potential borrowers a better chance of being approved for home financing. The FHA home loan program was developed in 1934 during the Great Depression, when people needed affordable mortgages. Today, they’re popular among all walks of life, especially first-time homebuyers and people with less-than-great credit scores.
FHA loans may be used for single or multi-unit homes, as well as certain approved condos and manufactured homes. The limit you can borrow with an FHA loan varies by county. In Davidson County, the limits are:
- $890,100 for a one-unit property
- $1,139,500 for a two-unit property
- $1,377,400 for a three-unit property
- $1,711,750 for a four-unit property
FHA Loan Benefits
FHA loan benefits include:
- As low as 3.5% required down payment with a 580 or higher credit score
- As low as 10% required down payment for a 500-579 credit score
- The ability to use gifts from others toward your down payment and closing costs
- No prepayment penalty
- They are assumable, which means someone else can take it over
- Certain FHA renovation loans can be used for repairs to a home
FHA Loan Approval
To get approved for an FHA loan, you’ll need a credit score of at least 580 and a low to moderate debt-to-income ratio – usually less than 42% is preferred. FHA loans can be approved with credit scores of as low as 500, but a higher down payment will be required which we can discuss in detail with you. You will need to show financial proof that you’re able to pay your mortgage payments and other monthly homeowners’ expenses, including mortgage insurance (MIP).
Get Started with an FHA Loan Today
Lincoln Home Loans has the local experience you need in a mortgage team, backed by the power of several national lenders with competitive interest rates. We serve clients throughout Nashville, Memphis, Clarksville, and the surrounding Tennessee cities. If you are a first-time homebuyer and are ready to explore your homeownership options, contact us today to learn more!