Did you know that the federal government is in the mortgage business? Well, they are, sort of. A Federal Housing Authority, or FHA, loan is a mortgage that is insured by them and issued by an FHA-approved lender. FHA loans are designed for lower-income borrowers, and they require a lower minimum down payment and lower credit scores than conventional loans. According to the FHA, in 2020, you can borrow up to 96.5% of the home value with an FHA loan. That means you will have to come up with a down payment of only 3.5% of the loan value. The minimum credit score to qualify for an FHA loan is 580. These benefits make an FHA loan very popular among first-time home buyers. Zion Mortgage is an approved lender and offers FHA loan services in Texas.
Knowing How It Works
An important note to remember is that with an FHA loan, the FHA itself isn’t lending you money. The loan comes from an approved lender, like Zion Mortgage or a bank. The FHA guarantees the loan in the event that the borrower defaults on it, so the lender isn’t left with nothing. The government insures the loan and will pay it back in full if the borrower does not. With this kind of mortgage loan, the lender assumes less risk, and the FHA takes it on.
What You Need To Secure an FHA Loan
In order to secure the guarantee of the FHA, borrowers are required to get mortgage insurance. Premium payments are made to the FHA and not the lender. You will need to submit similar financial information as with a traditional mortgage. The FHA will want proof of employment, credit scores, credit history, and proof of assets. Zion Mortgage offers FHA loan services in Texas and can walk you through the entire process. Contact us today so we can get the process started.