Reaching the milestone of buying a house is not easy for most Americans. Stricter lending requirements have made it difficult to qualify for a home loan program. But thankfully, there is an FHA home loan program that makes homeownership easy for buyers like you. Backed by the Federal Housing Administration, this loan has lenient requirements; so, one can easily qualify for this loan.
But as the loan is not offered by the FHA, but by the FHA-approved lenders, you need to opt for one of the best FHA lenders in Houston. But how to find such a lender? Well, following these tips will help you a lot:
- Shop several FHA mortgage lenders
FHA-approved lenders offer FHA home loans, not the federal government. So, there are no fixed requirements mentioned for buyers that lenders need to follow. For this, the lenders set the requirements in their own way. Each lender offers their own FHA loan rates and fees, and this is why it is important to shop around. Moreover, some lenders have more lenient qualifications requirements than others.
You need to compare your all-in FHA mortgage costs with at least three top lenders before you move forward. You should always keep in mind that all FHA loans require the borrower to pay mortgage insurance premiums (MIP). There is an upfront MIP of 1.75 percent of the loan amount that is paid when you get the home loan. Besides, there is an annual MIP that varies from 0.45 percent to 1.05 percent, based on factors like the loan term, loan-to-value ratio, and loan amount.
- Check your credit score
You need to understand your credit score before you apply for an FHA loan. For one, your score may be better than you think – and perhaps even good enough to qualify for a conventional mortgage. Moreover, keep this in mind that your lender options could be limited in case your credit score is too low. Though the minimum credit requirement for an FHA loan is 500, many lenders won’t work with you this credit score. With a 500 credit score, you need to put a 10 percent down payment, whereas the down payment requirement is 3.5% percent if your score is higher than that. On the flip, if your credit score is between 500 and 579, you need to put a 10% down payment. But you can avoid it by improving your credit score before applying for the loan.
- Understand your APR
Last but not least, you should not forget to measure the impact of the APR or annual percentage rate that you qualify for. You should keep this in mind that there is a difference between the interest rate and APR. Your APR will determine how much interest you pay in each of your monthly mortgage payments, and thus, how much interest you will pay over the life of the loan. It is easy to assume that FHA loans would all have the same APR, however, this could not be further from the truth. The FHA does not set the interest rate; each lender sets it on their own. Therefore, there can be quite a lot of variance between lenders. You will find the interest rate the lender is charging on the front page of your loan estimate under “loan terms”. You can use an APR calculator to know about this.
So, follow this guide to find the best FHA-approved lender and apply for the loan today!