F
HA loans can make the difference between someone buying a home or renting.
An FHA loan is a loan that is insured by the Federal Housing Administration and only requires a down payment of 3.5%. The borrower pays an upfront as well as a monthly insurance fee to protect the lender in case of default.
So what’s the difference between FHA and Freddie Mac’s 97% program? First, and most important, FHA loans allow for a higher debt ratio than you find with virtually any other loan. Second, there is no minimum credit score required. For instance, a recently approved borrower had a student loan paid by parents, but since the loan was in her name, no bank would give her credit for the payment ….but FHA did since the debt ratio is expanded.
Why don’t all banks offer FHA loans? Because the FHA loan can be riskier, many lenders fear having to buy them back or getting audited by the FHA to ensure strict underwriting. For some banks it’s not worth the risk.
At Total Mortgage we are confident in our underwriting and since we only do mortgages, we want to offer as many products as possible. Ask me about FHA …and it’s not just for first-time homebuyers!
