FHA Loan Program Q&A

St. Louis, MO – February 28^th, 2023 – Exciting news! Monthly mortgage insurance payments for FHA loans are being reduced. Currently, the annual mortgage insurance premiums are at 0.85% of the loan amount. However, they are being decreased to 0.55% of the loan amount which will save you money on your monthly payment!  

If you’re on the fence about what loan program to choose that best fits your lifestyle, an FHA loan could be the perfect choice for you! We sat down with Loan Officer, Amber Moser (NMLS #1996946), and discussed some common questions regarding FHA loans and requirements. Check out what she has to say!

Q: What is an FHA loan?

A: An FHA loan is a government-backed loan that is well suited for borrower that needs a little more flexibility on credit score requirements, debt to income ratios, and/or a low-down payment option. It allows borrowers to buy 1-4 unit properties with as little as 3.5% down as long as it is their primary residence. I am a big fan of the FHA loan personally!

Q: What are the qualifications for an FHA loan? What would an ideal credit score be while applying?

A: Qualifications are going to be similar to other loans:

• Current Income & a 2-year work history (education can be part of the history)
• Qualifying FICO score (see below)
• Assets for 3.5% Down Payment or Gift Funds can be contributed from an acceptable source.
• Additional Qualifications might apply depending on your situation.

FICO scores are an important part of the qualifying process and determine the minimum down payment required. A borrower needs at least a 580 FICO score to qualify for the 3.5% down option. 

Q: Are FHA loans just for first time homebuyers?

A: This is a common misconception! FHA Loan are not just for First Time Homebuyers; however, they are for primary residences only. My husband and I used an FHA loan to buy our first home, sold it and used an FHA loan to purchase our next home as well! There are a lot of advantages for some First Time Buyers to use an FHA loan.  Debt to Income and down payments can be a big hurdle for a lot of individuals wanting to buy their first home, but FHA is the most forgiving on both of those scenarios.  For borrowers who have lower credit scores and high Debt to Income, I often find that Mortgage Insurance quotes for FHA are lower than conventional options.  Interest rates for FHA are almost always lower than conventional options for those borrowers as well.  Sometimes the Mortgage Insurance and Interest Rate can save a home buyer hundreds per month compared to conventional financing.  

Q: How is a borrower’s rate determined for an FHA loan?

A: All interest rates are shopped based on the borrower’s scenario. FICO scores, Debt to Income Ratios, and Down Payment amount will impact the rates available.  Because the FHA loan is government backed and slightly more risk tolerant, most borrowers will be offered better rates on an FHA loan compared to conventional loan options.

Q: Does having a high debt-to-income ratio prohibit being approved for an FHA loan? What would you recommend to a borrower who has a high DTI but wants an FHA loan?

A: FHA is the most forgiving when it comes to borrowers with a higher debt-to-income ratio, but there are still limits. FHA allows a higher total debt-to-income ratio than Conventional or USDA loans.  Borrowers who have a high DTI and are considering an FHA loan should definitely speak with a lender before they start the home shopping process!  I encourage all my clients to start the mortgage approval process well before you start the home shopping process.  This allows us to get a full picture of your financial situation and credit profile, preapprove you for a certain purchase amount, or if we are unable to preapprove you at that time, we can advise you on the steps needed to reach your homeownership goals!

If you’re interested in purchasing your first home, it may be a good idea to sit down with a knowledgeable loan officer before you are ready to buy. Gershman Mortgage staffs only the best and brightest loan officers in the game and they will help you make the best decision for you and your family. Especially when it comes to down payments, they can help you determine a price range that fits your budget and how much you’ll need.

When you are ready, contact a Gershman Mortgage Loan Officer to start your journey home today.

 ______________________________________________________________________________________________________________

About Gershman: Communities, families, and homes are at the heart of what we do at Gershman Mortgage. Our founding principles are based on the core values of honesty, integrity, the entrepreneurial spirit, and putting our customers first. We are passionate and committed to customer service and strive to ensure that we exceed the expectations of our customers. We are a customer-centric company devoted to creating and maintaining long-lasting relationships.

NMLS #138063 16253 Swingley Ridge Road Suite 400 Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender. This is for informational and educational purposes only and not an offer to lend or extend credit. Terms and conditions are subject to change pending agency and investor guidelines.