Do you want to apply for an FHA loan and so, looking for an FHA lender? Read on to know the tips that you can follow for this.
Want to apply for an FHA loan to buy a home? Great! Insured by the Federal Housing Administration, an FHA is the most suitable home loan option for its lenient requirement. Although the FHA guarantees the loan, they don’t offer it. This loan is offered by the FHA approved lender.
With so many lenders, finding one of the best FHA lenders in Houston is not easy. Worried about how to find the right one? Here are a few tips that you can follow to find the right lender for an FHA loan.
- Shop several FHA lenders
The FHA-approved lenders offer this loan, not the FHA itself. But each lender offers their own FHA loan rates and fees that is why a homebuyer needs to shop around. Moreover, some lenders offer their lenient 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 keep in mind that all FHA loans need 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 loan. And then there is an annual MIP, which varies from 0.45 percent to 1.05 percent based on factors, such as loan amount, loan term, and the loan-to-value ratio.
- Know your credit score
Before you apply for an FHA loan, you should try to know the credit score. If your credit score is too low, your lender options could be limited. The hard cutoff for approval of an FHA loan is a 500 credit score, but you need to put a 10 percent down payment with this score, whereas the down payment requirement is 3.5 percent if you have a good credit score. If your credit score is something between 500 and 579, then you can take steps to improve your credit score for lowering the down payment requirement.
- Understand how closing costs work
The U.S. Department of Housing and Urban Development, or HUD, oversees the FHA program, as well as caps closing costs at 3% to 5% of the loan amount. The FHA allows sellers and home builders to pay some of the closing costs. In case the lender is rolling the closing costs into your loan amount that is another possibility, you need to pay a higher mortgage rate. After applying for a loan, within three days, you will get an official loan estimate. To know how much the lender is charging, you can check the closing cost details. These costs differ from lenders to lenders and are something that can be negotiable. If you think that you need help, then you can opt for a down payment assistance program to get help with the closing costs.
These are some of the tips that can help you choose the right lender for an FHA loan. So, what to wait for? Follow the tips to find the right lender and apply for a loan today.