Buying a home is the ultimate goal for many people. However, this dream is often left unfulfilled because of the huge expense that comes with home buying. This is why various loan products and programs were developed in an effort to provide financial aid for those who wish to buy their own home. Some of these loan programs are backed by the government agencies to make it easier for those who are interested to qualify, even the ones who have less than perfect credit score. FHA loans are an example of this type of loan assistance program. If you are an interested home buyer, make sure you learn about FHA loan requirements in Virginia to help you prepare and secure that home purchase sooner.
Introduction to FHA Loans
An FHA loan is a type of mortgage loan that is provided by the Federal Housing Authority (FHA). This program was established in 1934 following the period of the Great Depression. The government agency was founded primarily to provide mortgage insurance to those who take out loans and are unable to pay them off (loan default). This is one of the challenges that mortgage lenders face, which is why they only provide loans to individuals with a good credit standing. The possibility of suffering from losses due to loan default is too big of a risk for them to take. But with FHA backing the loan up, they are more lenient to home buyers who are in need of financing assistance for their purchase.
This type of loan is available not just for first-time home buyers. It is a loan that can be enjoyed by repeat home buyers, too. In order to qualify for the loan, the FHA will charge an upfront mortgage insurance premium along with a mortgage insurance fee to all FHA loans. This will also minimize losses in the event that the mortgage was foreclosed.
Since the qualification requirements are more lenient and outside the scope of conventional mortgage loans, this opens up the possibility for interested home buyers. This is specifically beneficial to those who are unable to qualify for traditional loan types. The main criterion to obtain an FHA loan is that the property that you purchased must be for use as primary residence.
FHA Loan Requirements in Virginia
How do you qualify for an FHA loan in Virginia? The list of qualifications is largely the same across all states but it is important to check within your state’s government agency to ensure that you satisfy all requirements.
When choosing FHA-approved mortgage lenders, you will have to satisfy the following list of requirements:
- You must have a credit score that is higher than 580. This is lower than most of the credit score limits imposed by conventional mortgage loans.
- You will only be required to pay 3.5% of down payment for the home (instead of 10 to 20% required in conventional loans).
- Your income to debt ratio must be less than 43%.
- You must have mortgage insurance on your home purchase.
As mentioned above, FHA loans are not exclusive to first-time home buyers. But the benefits and the FHA loan requirements in Virginia suit first time home buyers who might not have enough savings to pay for the property’s down payment. It is also advantageous to those who have not built up a good credit standing yet to qualify in traditional home loans.
Benefits of FHA Home Loan
Why choose an FHA loan for your home purchase? The FHA loan program is just one of many government-backed loan types that can be enjoyed by interested home buyers. However, there are several benefits that you can get with this type of loan to make your home buying process smooth and efficient.
First and foremost, it requires a lower down payment so you won’t have to shell out a lot of money to start the home buying process. Some of the mortgage loan providers will base your down payment on the credit score. The higher your credit score, the lower your down payment (and the lower your credit score, the higher your down payment). As you can see, this isn’t the case with an FHA loan because you will mostly start with the 3.5% down payment requirement, regardless of your credit score.
In addition to a lower down payment and less restrictive credit requirements, you can also enjoy competitive interest rates. Just like the down payment, conventional mortgages use your credit score as the basis for the interest rate on the loan. But with FHA loans, you can get a lower, fixed rate interest for a maximum of a 30-year loan term.
Whether you are a first time home buyer or not, make sure you look into FHA loans for your next home purchase. If you qualify, you can enjoy plenty of benefits that will save you time, money, and effort.