FHA Home Loan Options You Should Know

September 18, 2019

Some who are interested in getting a loan to buy or improve a home don’t know their FHA home loan options. You do not need to borrow money against your 401(k) to buy a home, an FHA mortgage loan requires a low down payment and can generally be more forgiving of past credit mistakes than some conventional mortgages.

New Home Purchase Loans

You can use an FHA mortgage to buy an existing construction home or have one built for you from the ground up using an FHA One-Time Close construction mortgage. You can also use an FHA mortgage to buy a mobile home or manufactured home.

You also have the option to purchase a condo unit using an FHA home loan. FHA loan rules for condo approvals have changed and starting in October 2019, FHA loans may be available for condo units in projects that have not yet been FHA approved.

FHA loan regulations state that new purchase FHA mortgages require a FICO score of 580 or above for maximum financing and the lowest down payment.

This is the FHA standard, not your lender’s requirements which may vary-a lender may require higher FICO scores or compensating factors from those with lower credit scores.

Refinance Loans

You can refinance an FHA mortgage with most FHA refi loan options, and refinancing a non-FHA mortgage is possible using an FHA cash-out or no-cash-out refinance loan. You can refinance a non-FHA mortgage to get into a lower interest rate, get out of an adjustable rate mortgage, or simply to pull equity out of the home in cash.

FHA refinance options also include a refi loan known as the FHA 203(k) Rehab Loan which allows you to refinance and renovate your home with FHA refi loan funds used on approved projects.
FHA loan rules for these mortgages don’t allow unrestricted cash back to the borrower, and all funds from the loan must be used for projects approved by the FHA guidelines and your lender.

Ask a loan officer to help you determine whether the full size FHA 203(k) Rehab loan is for you or whether you need the smaller FHA 203(k) Streamline Refinance which has a lower loan limit and is good for smaller, less ambitious home improvement projects.

Any renovation that involves work on load-bearing structures will require the full FHA 203(k) Streamline loan so talk to your loan officer about the size and scope of your renovations before trying to decide which loan is best for your needs.

------------------------------

RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process