InTouch Credit Union offers Federal Housing Administration, or FHA, mortgages which are designed to make home ownership possible for those with lower incomes or credit worthiness. First-time homebuyers may find FHA loans appealing due to low down payment requirements.
FHA mortgages require lower credit scores than conventional mortgage (often as low as 580), and the down payment can be very low, potentially as low as 3.5% (ex. on a $150,000 home, that would be $5,250). The loan terms are 15 or 30 years and the property you choose must meet FHA requirements.
One big difference between a conventional mortgage and an FHA mortgage is who you get your mortgage insurance through. While you apply for a mortgage through an FHA-approved mortgage lender just like a conventional mortgage, the required mortgage insurance comes from the Federal Housing Administration.
When a home loan is insured through FHA insurance, the borrower pays for it as part of the original loan as a 1.75% initial fee, and as part of the monthly mortgage payments for 11 years or the entire life of the loan, depending on the loan-to-value percentage (the amount you owe, divided by the value of the property). Your mortgage insurance goes to the FHA, instead of to a private mortgage insurance company.
The extra expense of the insurance often leads to the question of whether an FHA loan or a conventional loan is the better deal. Your credit union Mortgage Professional can help you to calculate and compare the loans with the most up-to-date rates and information.
Besides the ability to make a much lower down payment, FHA loans can also allow for different sources for the down payments. For example, with an FHA loan up to 100% of your down payment can be a gift from an immediate relative, while a conventional loan allows for only a part of the down payment to be from gifts.
The FHA also offers down payment assistance in the form of down payment grants. Be sure to check the FHA’s website and discuss your qualifications for these grants with your Mortgage Specialist.
The FHA also requires a property appraisal in order to qualify the property itself for the loan. This is in addition to the home inspection that is part of the typical loan approval process. Finally, there is a cap on lending amounts, depending on the location of the property you are interested in.
A few different kinds of FHA loans are available, including the Basic Home Mortgage Loan, Construction to Permanent Loan, and a newer Energy Efficient Mortgage that includes the ability to roll energy improvement costs into the final mortgage amount.
Only FHA-approved lenders like InTouch Credit Union can set up these types of loans. Our Mortgage Specialists are familiar with the various types of FHA mortgage loans, along with their qualifications and conditions.
There are many factors that influence how much mortgage you can qualify for and what your monthly payment will be. Along with the interest rate and term, the down payment amount has the biggest impact on your mortgage payment amount.
Using our mortgage payment calculator, you can calculate an anticipated monthly payment based on different rates, terms and down payments. On a $250,000 mortgage, changing from a 20% down payment to a 10% down payment increases the monthly payment more than $200 on a 30-year mortgage at 3.50% APR (Annual Percentage Rate). That increase does not include any mortgage insurance payment which is often required on mortgages financed with less than a 20% down payment.
As with all loans, credit and income requirements are part of the application process. Talk with our Mortgage Specialists today to discuss how pre-qualifying for a fixed-rate mortgage can make your homebuying process smoother and your bargaining position more robust.
If you are just beginning to explore FHA mortgages at ITCU, take a look at the great interest rates we offer and then contact us or use our handy online application to get the mortgage process rolling today.
*Mortgage loans not currently available in the following states: AZ, ID, HI, KS, ME, MN, MO, ND and NY.
**Not a complete list of available options. Click on Personal Rate Quote or speak to one of our mortgage professionals by clicking on Meet Our Loan Officers for more information. Conventional interest rates are based on the purchase of a single family primary residence in Texas for $500,000 with 20% down payment, a loan amount of $400,000, and a qualifying FICO score of 740 or above. Rates are indications only and are subject to change without notice. Rates quoted assume a 0.50% origination fee paid by borrower. Lower rate options may be available. The actual interest rates and fees available to you will be based on your actual credit history and other qualifying criteria and may be different than the rates, points, and fees displayed here. Your actual interest rate will be determined at the time an interest rate lock is completed. Equal housing lender. NMLS ID# 149532