If you’re thinking about buying a home with an FHA loan, you’re not alone – millions of people use them each year. Here’s what you need to know about these loans, which are backed by the Federal Housing Administration.
3 Fast Facts About FHA Loans
Buyers considering FHA loans need to know that:
- You don’t necessarily need a great credit score to use an FHA loan
- Your down payment could be as low as 3.5 percent
- Your closing costs might be covered by the seller, builder or lender
FHA Loan Fact #1: Credit Score Requirements
The minimum credit score you need for an FHA loan depends on the type of down payment you’re able to come up with. If your credit score is between 500 and 579, you’ll have to come up with a 10 percent down payment; if it’s above 580, you could be eligible for a 3.5 percent down payment.
FHA Loan Fact #2: Down Payments
For most borrowers, a 3.5 percent down payment is entirely possible – but again, it’s based on your credit score.
There’s other good news, too. You may be able to use a gift from a family member, a grant from the state government or local government, or a down payment assistance program.
FHA Loan Fact #3: Closing Costs
Sellers, builders or lenders can contribute to your closing costs if you’re using an FHA loan. They might be able to pitch in for appraisals, credit report fees, title expenses or other costs as incentives for you to buy a new house.
Sometimes, though, lenders charge a higher interest rate if they pay closing costs, so read the fine print and compare loan estimates from different lenders if you’re thinking of accepting a contribution from your lender.
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