What is an FHA Loan?

December 2, 2020 By , ,

Every borrower has a unique financial situation and will require different types of funding based on their long-term goals. For borrowers interested in purchasing their first home or those looking for more flexible financing than a conforming loan, an FHA loan could be the right solution.

Benefits of an FHA Loan

The government-insured Federal Housing Administration (FHA) loan is a beneficial option for those looking for more financial flexibility from their home loan.

Loan Details

  • Low down payment (as low as 3.5%)
  • Minimum 620 credit score required
  • Non-occupant co-borrowers may be on the loan
  • 100% of the down payment can be from gift funds
  • Seller can pay closing costs up to 6%
  • Qualification with less than two-year rental history

2021 Loan Limits

No matter what loan you qualify for, increased loan limits put more buying power in your hands. It also allows those who already own a home to take more cash out of their home’s equity. Although there is no guarantee that rates will change from year-to-year, it’s common that they will.

On December 2nd, the FHA loan limit for single-unit properties was increased by 7.42 percent to stay on par with national median home prices. The new FHA loan “ceiling” is now $822,375, up from $765,600, and its “floor” increased to $356,362 from $331,760. Keep in mind that not all counties fall under the new 2021 loan limits— some counties in high-cost areas require a higher loan limit. For more information about your county, you can search by location here.

Should You Consider Conventional Financing Instead?

For strong borrowers with excellent credit or a substantial down payment, conventional (conforming) home loans may be a better option for you. It pays to check with both programs and discuss both options with your Mortgage Advisor to decide which mortgage option will save you the most money in the short and long term.

Other Loan Options at PacRes

We understand that no two clients are the same. That’s why we sit down to find the best possible solution for your home loan needs. At PacRes, we offer a variety of loans to meet an array of financial differences, such as:

Is an FHA loan right for you? Contact a Mortgage Advisor today to learn more about your buying power in 2021!

Note: We are currently unlicensed in some states, which cannot be selected at this time.

*Some state and county maximum loan amount restrictions may apply.
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