The FHA mortgage has evolved since its inception in 1934. After the crash in the 1930's, countless families lost their homes due to unemployment. The Federal Housing Administration (FHA) was created to help make home ownership more affordable to the thousands who couldn’t afford the new restrictive guidelines for obtaining a home loan. Lower down payments were required and loans from private institutions were insured by the U.S. government. After becoming a division of the Department of Housing and Urban Development in 1965 the Federal Housing Administration continues to evolve to meet the current demands of borrowers and lenders.
Since its creation tens of millions of families have been able to qualify for a mortgage loan. Many of those families received their mortgage loan through Sun Mortgage Funding for homes located in Saint Mary, LA. Because of the less restrictive qualifications required by FHA, many lower income or credit challenged individuals have aspired to achieve home ownership.
Purchasing a home with a conventional mortgage requires a 5-20% down payment, a debt ratio of 28% of your gross monthly income for housing costs and a ratio of no more than 36% of gross monthly income for all debt combined. Your FICO score must be 620 or higher. With these guidelines, many potential borrowers are unable to qualify for a conventional mortgage, so they opt for an FHA mortgage.
FHA mortgages are available to borrowers with FICO scores as little as 580, however the majority of mortgage lenders require a minimum credit score of 620-680. Sun Mortgage Funding requires a minimum credit score of 640 and a down payment of 3.5% of the negotiated price of the property. The debt ratio for FHA loans is 31% and the allowed monthly payment maximum for the mortgage is 41% of income. With these less restrictive guidelines more people can qualify for an FHA loan.
To make this loan more appealing to a mortgage lender, the Federal Housing Administration offers insurance to lenders for making these financial contracts with borrowers. This insurance is actually paid by the borrower through Private Mortgage Insurance (PMI). This extra expense is only required when a borrower puts less than 20% down on their purchase. You can put 20% down on an FHA loan to avoid PMI. However, it does seem counterproductive, since one of the major reasons for an FHA loan is to allow borrowers to put less money down.
How much you can afford to pay as a down payment is up to you, at least you have the option of paying as little as 3.5%. Find a mortgage lender that offers consultations, so you can select the best mortgage term for your FHA loan. Enter into that contract with Sun Mortgage knowing that your experience with us is being customized to fit your family's financial needs for both short and long term.
Throughout its history the FHA loan has focused on giving access to home ownership to credit and cash challenged individuals.