There are so many different options out there when it comes to getting a home loan. There are traditional banks, credit unions, and even internet options. There is so much to sift through. One of the options that anyone has to consider is an FHA loan in Lubbock.
What Is An FHA Loan?
An FHA loan is a mortgage that is insured by the Federal Housing Administration and is issued by a lender that is an approved FHA-lender. An FHA loan in Lubbock is a great option for those who are first time home buyers and those who are low to moderate income borrowers. An FHA loan borrower can borrow up to 96.5% of the value of the home, meaning that only 3.5% of the value is required as a down payment (which is much lower in comparison to other lender’s requirements).
This loan is considered insured because there are protections put in place for the lender that give them a certain guarantee on the money that is borrowed. An FHA loan in Lubbock is guaranteed due to the 2 different types of mortgage insurance that the borrower is to pay. The first is an upfront mortgage insurance premium (UFMIP). The other is an annual mortgage insurance premium.
The annual mortgage insurance premium is a monthly payment, despite what the name suggests. These monthly payments go into an escrow account in case the borrower defaults on the loan. This is then used to pay the lender in order to guarantee them certain monetary protections.
Qualifications For An FHA Loan In Lubbock
These loans are great for low to moderate income borrowers as well as first-time homebuyers because of the particular qualifications that the FHA lays out.
- Borrowers can have a credit score as low as 500. If the borrower has a score that is between 500 and 579, they will be required to make a 10% down payment. If their score is 580 and above, they will be able to put down around 3.5%.
- The Mortgage Insurance Premiums are required payments by the borrowers.
- The borrower also needs to have a debt-to-income ratio that is less than 43%.
- The home that the loan is being taken out for must be the borrower’s primary residence.
- The borrower also needs to be able to provide proof of a stable income. This proof must show that they have been at their place of employment for at least 2 years.
Other Benefits Of FHA Loans in Lubbock
FHA loans in Lubbock also offer other really great perks to their borrowers. They offer down payment assistance which is great for many borrowers because coming up with the down payment is one of the most difficult financial parts of the home buying process. They also allow for the entire down payment to be a gift from a friend or family member, unlike conventional banks.
Another of the great perks of an FHA loan is that more than just a credit score is considered. They look at your payment history bankruptcies, foreclosures, and other extenuating circumstances. FHA loans make it possible for those who thought that buying a home was impossible to be able to buy the home of their dreams. This is definitely an option that any prospective home buyer needs to consider.