Getting Started
Have you considered buying a home, but aren’t sure whether you can come up with 10% to 20% for a down payment? Are you looking for alternatives to conventional loans? If so, then Hunter Lending can help!
We have a variety of lending options designed to meet the unique needs of our clients, including Denver FHA home loans and the surrounding areas. These popular loans are a great way to purchase a home while circumventing the restrictions of conventional mortgages.
What is an FHA Loan?
An FHA home loan is a special type of mortgage. Unlike a conventional mortgage that is backed by a traditional lender, FHA loans are backed by the Federal Housing Administration. They have to be issued by an FHA-approved lender, like Hunter Lending.
These loans are an excellent choice for low-to-mid income borrowers. They are especially beneficial for first-time home buyers because they require a lower minimum down payment and allow for lower credit scores than most conventional loans do.
While an FHA mortgage loan in Colorado will still be issued by a bank, they are backed by the federal government. The FHA guarantees these loans against default, which is why financial institutions are willing to lend to buyers under more relaxed terms.
Who Can Get a Denver FHA Home Loan?
It’s not hard to qualify for Denver FHA home loans. Virtually anyone can do it. There are no income-based restrictions, which means that you will never be told that you “make too much” to qualify.
However, there are limits on what you can borrow. Generally, you will be restricted to the median home value in your area. This prevents people from abusing the program or overpaying for a home.
How Do I Qualify for an FHA Home Loan?
FHA loans are extremely popular because of their favorable terms, which makes qualification easy. You will need a credit score of at least 500. However, your score must
Eligibility Requirements
As noted above, the primary eligibility requirement will be your credit score. If your score is not quite high enough, then you should start taking steps to improve it. You could begin by paying off old debt or even meet with a financial advisor. Our team can also give you some guidance on improving your eligibility.
In addition to having an eligible credit score, you will also need an appropriate debt-to-income ratio. This is meant to assess your ability to make payments on your new home. If your debt to income ratio is too high, you will need to shed some existing monthly payments.
While Hunter Lending will assess your debt-to-income ratio during your application process, you can easily calculate it yourself. This can save you time and allow you to make necessary preparations before applying.
The first step is to add up all of your monthly payments that will show up on a credit inquiry. This includes:
- Car payments
- Credit card payments
- Student loans
- Child support
- Alimony
- Co-signed loans
When you’re calculating your debt to income ratio, keep in mind that these are your minimum monthly payment amounts. If you are paying extra on your car or credit card, you will not use that number. Utilize the figures that are included on your monthly statement to get an accurate assessment of your debt-to-income ratio.
FHA loans are a great way to purchase a home. However, they are not right for everyone. FHA loans will not serve you if your credit score is below 500. However, consolidating your debt with a personal loan can help you to boost your score and improve eligibility.
FHA loans are also a poor fit for those that are shopping at the higher end of the price spectrum. If your dream home is well above that 115% mark, then you should consider a conventional loan. Traditional loans are also a great choice if you are in the position to make a larger down payment, as you will often save significant money in the long run.
By using the information provided above, you can determine whether an FHA loan is right for you. You can also contact our team at Hunter Lending to speak with a loan officer about our other loan options as well. We will be able to assess your unique needs and find the best home-buying solution for you.
As with any financing option, an FHA loan will require you to have homeowner’s insurance on your new home. This insurance is traditionally paid through an escrow account, which is incorporated into your monthly mortgage payment.
An FHA loan also requires that you have mortgage insurance. You will be charged an upfront mortgage insurance premium (MIP) that is 1.75% of your loan amount. You can pay this as part of your closing costs or request that it be rolled into the loan.
You will also pay a monthly MIP as part of your mortgage payments. The exact cost of your MIP will vary with each loan, but you can expect it to range from approximately $100-$200. Once you close, the MIP will be a fixed value and will not change unless you refinance your loan.
Denver FHA Home Loans
If you are considering an FHA loan in Colorado, then Hunter Lending can help. Our experienced, friendly team can guide you through the complex home-buying process. We will find the perfect financing option for your goals and eligibility. Let us make your dream of homeownership a reality with an FHA loan!
Limitations of FHA Loans
As described above, the primary limitation of FHA loans is the amount that you can borrow. The limit is set at 115% of the median home price for your county. This figure is determined by the U.S. Department of Housing and Urban Development. There are some exceptions in place, but they do not apply to FHA loans in Denver.
