FHA Home Loans In Tacoma

What is an FHA Loan?

An FHA home loan in Tacoma, Washington, is a mortgage insured by the Federal Housing Administration (FHA), a federal agency in the United States. It is intended to allow the average American to own their home. 

One of the attractive features of an FHA loan is the option for a minimal down payment. FHA loans enable you to buy a home with only a 3.5% down payment, less than conventional loans typically require. It is the most accommodating mortgage program available.

What are the Eligibility Requirements of Tacoma FHA Loans?

The FHA loan is a mortgage option insured by the Federal Housing Administration that is particularly popular with first-time home buyers due to its lenient eligibility requirements. The primary eligibility requirements for an FHA loan in 2023 are as follows:

• Credit

Borrowers must have a minimum FICO score of 580 to be eligible for the low down payment benefit set at 3.5%. Borrowers with FICO scores between 500 and 579 can still qualify, but a 10% is required.

• Debt-to-Income (DTI) Ratio

The debt-to-income ratio must be lower than 43% for the loan to be approved. However, depending on the lender and compensating factors, this limit may be flexible.

• Down Payment

A minimum down payment of 3.5% is required, but the requirement increases to 10% if the credit score falls between 500 to 579, and certain restrictions may apply.

• Employment

The borrower must have had consistent income in the last two years and a verifiable employment history. 

• Primary Residence

The borrower must use the property as his primary residence.

What are the Pros and Cons of an FHA Loan?

FHA loans can provide several advantages and disadvantages to applicants in Tacoma, Washington, making purchasing a home more accessible and affordable. Here are the primary pros and cons of Tacoma FHA loans:

• Advantages of an FHA Loan

  • Lower Down Payment and Credit Score Requirements

FHA loans are well-known for their modest down payment requirements. With a minimum 3.5% down payment, borrowers with a minimum credit score of 580 can qualify for an FHA loan. In addition, FHA loan programs are more lenient regarding credit scores than conventional loans. This could make homeownership more accessible to individuals with low credit scores and limited savings for a down payment.

• Higher Loan Limits

In response to soaring home prices, the FHA loan limits for 2023 in the state of Washington have increased. These increased loan limits can be advantageous in a high-cost area such as Tacoma, allowing borrowers to obtain adequate financing for a property.

The 2023 FHA Loan Limits for Tacoma, Pierce County, are $977,500 for a one-unit residence, $1,251,400 for a duplex, $1,512,650 for a triplex, and $1,879,850 for a quadplex, respectively. 

• Favorable Interest Rates and Terms

Interest rates for FHA loans are typically lower than those on conventional mortgages. The federal government insures the loans, lowering the risk for lenders and allowing them to provide more attractive terms.

• Flexibility in Terms of Properties

FHA loans can be used to buy or refinance a wide range of properties, including single-family homes and two- to four-unit multifamily dwellings. They can also be used to build or renovate new homes.

• Use of Gift Funds

Gift funds may be used to satisfy the minimum down payment requirement for FHA loans. Additionally, they allow cosigners, which can assist applicants in meeting loan requirements.

• Disadvantages of an FHA Loan

  • Mortgage Insurance

FHA loans require two types of mortgage insurance: an upfront fee and an annual premium. This raises the loan’s lifetime cost, potentially making it more expensive than conventional loans.

• Loan Limits

Loan limits for FHA loans differ by county. Tacoma is located in Pierce County, where the 2023 limit for a single-family property is $977,500. If you wish to purchase a property that exceeds this limit, an FHA loan will not cover the total cost, and you will be required to obtain additional financing.

• Property Standards

Existing and newly constructed properties alike must undergo an FHA appraisal. If the property does not meet government safety, integrity, and security standards, an FHA loan cannot be used to purchase it.

• Limited Options

FHA loans are solely intended for primary residences and are inappropriate for investment properties or vacation homes.

Apply for an FHA Loan in Tacoma

Capital Home Mortgage offers prospective Tacoma homebuyers many advantages when choosing an FHA loan. As an FHA-approved lender, Capital Home Mortgage can offer loans insured by the Federal Housing Administration with a 3.5% down payment. These loans are prevalent among first-time homebuyers and those with low credit scores. Capital Home Mortgage’s understanding of these programs and developments can help Tacoma homeowners acquire affordable housing.

Call us at (803) 600-0088 to speak with our FHA Loan Specialists.