Midland FHA Home Loans

Since its inception, the FHA loan program has helped millions of people across the country achieve the American dream of homeownership. The program has been instrumental in assisting credit-challenged borrowers in finally purchasing a home.

An FHA mortgage may be your best option if you’re a first-time homebuyer in Midland or have been turned down for a conventional loan due to credit or financial concerns. 

Advantages of an FHA Loan

The FHA home loan is well-known for its easy qualification process, but there’s so much more to this government-backed mortgage program than that. 

The following FHA loan benefits will help you understand why it’s such a hit among first-time homebuyers:

     1. Lenient Credit Score Requirement

Conventional mortgage applications are often rejected due to applicants’ low credit scores. To get a conventional loan, your credit score needs to be at least 620. The FHA, however, maintains that “the lack of a credit history, or the borrower’s decision not to use credit, may not be used as the basis for rejecting the loan application.”

Borrowers with credit scores as low as 500 can qualify for an FHA loan, but we recommend aiming for at least 580, so you can get better loan rates and terms.

     2. Low Down Payment

Borrowers with a credit score of 580 or higher are only required to make a 3.5% down payment. However, the down payment requirement jumps to 10% of the home’s purchase price for those with credit scores of 579 and lower.

     3. Higher Debt-to-Income Ratio

The ideal debt-to-income ratio for conventional loans is 36%, but borrowers with excellent credit are allowed up to 43%.  

However, a DTI of 43% is more than enough to get approved for an FHA loan. Some FHA lenders will even accept DTI ratios as high as 50% if the borrower can make up for it with a high credit score or a more significant down payment. People who want a home loan but don’t have perfect credit won’t have to pay a higher interest rate.

It’s common for FHA borrowers with a 660 FICO score to get the same mortgage interest rate as conventional loan borrowers with a 740 credit score. 

     4. Assumable

The fact that an FHA loan is assumable increases its marketability. When a home under the FHA loan program is sold, the buyers can take over the seller’s existing FHA loan instead of taking out a new mortgage.

Also, homeowners with FHA-insured loans have access to the FHA Streamline Refinance Program, which allows them to refinance their mortgages at a lower interest rate.

     5. Permits Fixer-Upper

If you’re looking to buy or refinance a home that needs repairs, the FHA 203(k) loan can help you do it all with one loan. The FHA 203(k) comes in two versions: the Streamline 203(k), which allows up to $35,000 in repair costs, and the Standard 203(k) for more significant and more expensive renovations.

Is an FHA Loan The Best Option For You?

No loan program is perfect, and the FHA loan is no exception. One of the major drawbacks of FHA loans is the mortgage insurance premium (MIP) that you’ll have to pay each month for the life of your loan, which raises your mortgage’s overall cost by a significant amount. But if you’ve been turned down for a conventional loan more than once, an FHA loan could make your dream of owning a home come true.

For a better insight into FHA loans, call us at Capital Home Mortgage and speak to one of our mortgage experts. As one of the most experienced FHA lenders in Midland and the state of Texas, we can provide you with all the information and guidance you need to make the right choice. 

You can reach us at (432) 218-4828 to start your Midland FHA application.