FHA home loans are one of the most affordable mortgage products on the market. They offer a host of benefits that have made them incredibly popular with Washington State borrowers. One of the main benefits of an FHA loan is that it allows borrowers to finance up to 96.5% of the purchase price of their home. This can make it easier to qualify for a loan and may help borrowers save money on their monthly payments. If you are going to get a mortgage soon, learn more about the main program requirements and review the FHA loan limits for 2022.
What is an FHA loan?
In the 1930s, the US housing market took a nosedive, leading to mass foreclosures and defaults. In an effort to stabilize the market and make loans accessible and affordable for everyone, the federal government established the Federal Housing Administration (FHA) loan program. The FHA provides insurance for lenders, which protects them financially in case a borrower defaults on their loan. This encourages lenders to offer loans to people with bad credit or those who can only afford to make a low down payment, as they know that they will be protected against any loss.
FHA loans are an appealing option for borrowers who may not have the resources for a traditional 20% down payment. In addition, FHA loans come with other benefits, such as low closing costs and flexible credit requirements.
As a result, the FHA loan program has helped to make homeownership more accessible and has played a vital role in stabilizing the US housing market.
FHA Loan Limits Washington
The FHA loan limit is based on the median home price in your area and is adjusted annually.
In 2022, the loan limits will range from $420,680 to $970,800, depending on where you live. This represents an increase of 18% from the 2021 limits. If you’re thinking of taking out an FHA loan, be sure to check the loan limit in your area to see how much you’ll be able to borrow. You may be surprised at how much house you can afford with an FHA loan.
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How to qualify for FHA loan?
Credit score
FHA loans are available to borrowers with a credit score of 580 or higher. Borrowers with a lower credit score may still be eligible for an FHA loan, but they will be required to put down a 10% deposit.
FHA loan limits
As it was mentioned above, the maximum loan limit for an FHA loan in Washington is $420,680, however, these limits may vary depending on the county in which you live. So if you’re looking to buy a home in Washington, be sure to keep these limits in mind when making your purchase.
A down payment
The program is available to Washington borrowers with low to moderate incomes who are looking to purchase a home with a down payment as low as 3.5%.
DTI ratio
A DTI ratio is a measure of your monthly debt and expenses versus your income. Lenders use this ratio to determine how much house you can afford and whether you’re likely to default on your loan. In general, the lower your DTI ratio, the better. A DTI ratio of 43% or less is ideal to qualify for an FHA loan, but there are exceptions. If you have a high credit score, for example, you may be able to get approved for a loan with a higher DTI ratio.
An employment history
Make sure you have a steady employment history or have been with your current employer for at least two years.
A valid SSN
Additionally, you must have a valid social security number, be a lawful U.S. resident and be of legal age to sign a mortgage in your respective state at the time of application.
Owner-occupied only
FHA loans encourage first-time home buyers to purchase their dream homes. Though, such a program is not for investment opportunities, since it requires living in the property instead of renting it out.
Foreclosure
The foreclosure crisis may be behind us, but that doesn’t mean it’s easy to get a mortgage if you’ve been through one. Borrowers must be three years out of foreclosure and have re-established good credit to qualify for an FHA loan, according to HUD guidelines.
FAQ
1. What is an FHA loan?
An FHA loan is a mortgage that’s insured by the Federal Housing Administration. This type of loan can be a good option for people who may not have the best credit history or who might not have enough money saved up for a traditional down payment.
2. How do I know if I’m eligible for an FHA loan?
The best way to find out if you’re eligible for an FHA loan is to contact a lender and ask. Each lender has its own standards for eligibility, so it’s important to shop around and compare before making a decision.
3. What are the benefits of an FHA loan?
One of the main benefits of an FHA loan is that it can be easier to qualify for than a conventional mortgage. Additionally, interest rates on FHA loans are typically lower than those on conventional loans. And, if you do need to put down a down payment, it can be as low as 3.5%.
4. What are the FHA loan disadvantages?
One potential drawback of taking out an FHA loan is that you’ll have to pay mortgage insurance premiums (MIP). These MIP payments are in addition to your regular monthly mortgage payment, and they’re designed to protect the lender in case you default on your loan. MIP payments can add up over time, so it’s important to factor them into your budget when considering an FHA loan.
Another thing to keep in mind is that some sellers may be reluctant to accept offers from buyers who are obtaining an FHA loan because they perceive the process as being more difficult than working with buyers who have conventional financing. However, this isn’t always the case, so it’s worth considering all your options before making a decision.
5. How many times can you get an FHA loan?
While you can technically get multiple FHA loans in your lifetime, you’re generally only allowed to have one at a time. This is to prevent people from using the program to buy investment properties. That being said, there are ways to get around this rule. If you sell your home and pay off your FHA loan, you’ll be able to get another one. And if you divorce and your ex take over payments on the loan, you’ll be able to get another one as well. So while the general rule is that you can only have one FHA loan at a time, there are some exceptions.
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Sum Up
In Washington, the FHA loan is a popular option for first-time homebuyers. The low down payment and flexible credit requirements can make it an attractive option. Now that you know more about FHA loans, you can decide if this type of financing is right for your needs.
If you have any further questions, be sure to contact LBC Mortgage, and we can help you navigate the home-buying process.
