Papillion NE FHA home loans, who does them

Papillion NE FHA home loans have become a popular choice for home buyers looking for a low down payment option. With Conventional loan guidelines becoming more strict the last several years, FHA has become a great alternative. If you think you have less than perfect credit or have high debt ratios, FHA allows you to purchase a home with little out of pocket.

Here are some advantages of an FHA loan in Papillion NE

Low down payment

FHA requires a minimum of 3.5% down on a home purchase. Unlike Conventional, FHA will allow this low down payment option to buyers with less than perfect credit. FHA will also allow a family member to gift you down payment funds so you do not need your own down payment funds to purchase.

You do not need perfect credit

FHA will go as low as 580 on credit score and still allow the 3.5% down payment. They will also allow you to purchase two years after a Chapter 7 bankruptcy or one year into an active Chapter 13 bankruptcy. If you are currently paying on a Chapter 13 and have 12 months of on time bankruptcy payments you can still qualify. There are additional restrictions so make sure if you are in a Chapter 13 to discuss options with a local lender.

FHA rates are usually better than Conventional

FHA rates are almost always better than Conventional rate. FHA rates are also less sensitive to credit score. While Conventional rates get much worse as your score goes lower, FHA only slightly adjust. The lower your credit score the wider the gap between FHA rates and Conventional rates.

FHA allows larger seller credits

FHA will allow the seller to contribute up to 6% of the purchase price to your closing cost and escrow. In Papillion NE this is almost always more than enough to cover all loan cost. With a large enough seller credit and a gift from a relative, it is possible to purchase a home with no money out of the buyer’s pocket.

FHA allows higher debt ratios

There are two debt ratios all loan products consider. The housing debt ratios is the percentage of your gross income that is taken up by the house payment. The total debt ratio is a combination of your new house payment and all debt payments on your credit report. The total debt ratio also considers monthly obligations for child support, alimony, bankruptcy payments, and tax lien payments. FHA approves loans at a much higher housing debt ratio and total debt ratio than conventional. If you are a bit high on debt you may still qualify for an FHA loan. FHA is also useful if some of your income cannot be verified.

FHA allows non-occupying co-signers

If you do not have enough income to qualify for FHA financing you still have options. FHA will allow a family member who is not occupying the home to co-sign with you. We can use their credit, income, and assets just as if they were occupying the property. This is an excellent option for parents wanting to help their children get their first home.

Here are the disadvantages of an FHA loan in Papillion NE

FHA has high Mortgage Insurance

FHA mortgage insurance is currently .85% of the loan balance. To calculate how much you will pay take .85% of the loan amount and divide it by 12. That is the monthly FHA mortgage insurance. Unlike Conventional, it does not get better or worse based on credit score. Typically this mortgage insurance is higher than Conventional MI.

FHA Mortgage Insurance never drops off

Conventional loans have mortgage insurance, but once you have 20% equity in the property it drops off. FHA mortgage insurance remains for the life of the loan. If you are putting down 20% or think you will have 20% equity in the near future, it may be a good idea to explore other financing options. Our team will continuously monitor your mortgage after you close to see if there are better options once you build some equity.

FHA has Upfront Mortgage Insurance

In addition to the monthly MI, FHA has an Upfront Mortgage Insurance fee that is rolled into you loan. If you are purchasing a house for $100,000 your base FHA loan amount is $96,500. However, the Upfront MI is added to the top of this loan. With a 1.75% Upfront MI fee, the final loan amount on a $100,000 purchase will be $98,250. This is added to the loan regardless of your down payment amount.

FHA is only for primary homes

Unlike Conventional, FHA cannot be used to purchase investment property, second homes, or vacation homes. It is strictly a primary home program. However, you can move out of your primary home at a later date and use it as investment property, second home, or vacation home.

You can only have one FHA loan out at a time

Unlike Conventional, you can only have one active FHA loan at a time. If you are moving out of your FHA home and plan to keep it you will need to use a different program for you next home purchase. There are a few exceptions to this rule. If you are being transferred for work and cannot qualify for other programs. If you can show that your family size has increased and you need to upgrade. FHA is very strict about these exceptions and rarely grants them.

The FHA loan program expands Papillion NE home buyer options

FHA is a fantastic program for those that do not fit into the stricter guidelines of Conventional financing. If you think you do not qualify to purchase a home at least contact a local mortgage lender to go over your credit, income, and assets. You may be surprised to find out that you can purchase a home.

We are a local mortgage broker serving Papillion and all surrounding areas in Nebraska. We are happy to go over all loan options with you.

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