The most common type of loan homebuyers turn to when they’re looking for a mortgage is an FHA loan. But these loans aren’t right for everyone and there are some things you should know before you apply.
In this article, we will discuss what FHA loans are, how they can affect your purchase, and what you should know before you apply.
As a real estate agent one of my most common questions from first-time homebuyers is “Do realtors help with FHA loans?” The short answer is yes, realtors can provide valuable guidance when it comes to securing an FHA mortgage. However our role is mainly advisory – the nitty-gritty details and final approval will need to come from a licensed mortgage lender.
In this comprehensive guide, I’ll explain exactly how realtors can assist buyers throughout the FHA loan process. Whether you’re just starting your research or are ready to submit your loan application, read on to learn how working with a knowledgeable real estate agent can help make your path to homeownership with an FHA loan smoother.
What is an FHA Loan?
First, let’s start with a quick overview of FHA loans. FHA stands for Federal Housing Administration – this government agency insures loans made by FHA-approved lenders. The key benefits of FHA loans are:
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Lower down payments – You can put as little as 3.5% down with an FHA loan, compared to the standard 20% down required for conventional mortgages. This makes them popular with first-time buyers who haven’t had as much time to save up a large down payment.
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More flexible credit requirements – FHA loans are available to buyers with credit scores as low as 580. Many conventional loans require scores of at least 620 or higher.
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Lower closing costs – The upfront mortgage insurance premium on an FHA loan is 1.75% of the loan amount, which can be rolled into your mortgage. On a conventional loan, private mortgage insurance premiums are charged monthly.
The tradeoff is that you’ll pay an annual FHA mortgage insurance premium, included in your monthly payments, for the life of the loan With at least 10% down, this premium stops after 11 years.
How Realtors Can Help with FHA Loans
As your real estate agent, I’m happy to provide general guidance when it comes to FHA financing. Here are some of the key ways I can assist:
1. Explain the Pros and Cons
I’ll have an open and honest conversation with you about the advantages and drawbacks of an FHA mortgage. While the low down payment and flexible credit requirements are very appealing, the lifetime mortgage insurance premium is a definite downside. I’ll help you weigh the pros and cons for your individual situation.
2. Refer You to an FHA Specialist Lender
While any mortgage lender can potentially do FHA loans, I keep a list of lenders who specialize in this type of financing. These FHA specialists will be able to efficiently guide you through the application and approval process. I’m happy to connect you with one of these trusted lending partners.
3. Assist With Document Collection
There is paperwork required for an FHA loan application, including bank statements, tax returns, pay stubs, and more. I’m happy to sit down with you to ensure you understand what documents you’ll need to gather. As we get closer to applying, I can also review your documents to make sure everything looks complete.
4. Explain FHA Appraisal Requirements
I’ll educate you on the FHA appraisal process. FHA properties must be inspected by a HUD-approved appraiser and meet certain health and safety standards. If repairs are required, they must be completed prior to closing. I can help set appropriate expectations around appraisals.
5. Review Your Budget and Debt-to-Income Ratios
A key FHA loan requirement is keeping your total debt-to-income ratio below 43%. As we explore mortgage options, I’ll work with you to evaluate your income, expenses, and existing debts to make sure an FHA loan will be feasible for you. Getting a handle on your finances early on can prevent surprises down the road.
6. Strategize on Seller Negotiations
If the FHA appraisal turns up required repairs, I can counsel you on how to negotiate with the seller. Will you ask them to make the repairs? Offer to split costs? Walk away altogether? With my real estate expertise, I can help devise a sensible game plan.
7. Explain the Loan Process Timeline
Securing an FHA mortgage takes time and coordination between your lender, the sellers, and other parties. I’ll provide insight into the typical FHA loan timeline so you know what to expect. Communication is key, so I’ll check in frequently to keep you updated on progress.
8. Be Your Go-To Resource
This entire process can feel overwhelming at times, especially when it’s your first home purchase! Rest assured you can turn to me as your trusted real estate advisor. I’m happy to answer your questions, explain unclear details, connect you with other professionals, and generally serve as your go-to resource for all things FHA financing.
Help From a Realtor is Invaluable for FHA Loans
Although I can provide general assistance, securing approval and managing the intricacies of your FHA loan itself will be between you and your lender. Be sure to choose an experienced FHA lender who can deftly handle the process.
If owning your own home with an FHA mortgage sounds appealing, I’m ready to help when you are! As your realtor, I’ll take a consultative approach and provide the FHA guidance you need. My support will be with you from start to finish – when you work with me, you won’t have to tackle financing this major purchase on your own.
Frequently Asked Questions About FHA Loans
If you’re exploring FHA financing, you likely have plenty of questions. Here are answers to some of the FAQs I hear most often from my buyers:
Who is eligible for an FHA loan?
To qualify for an FHA loan, you must:
- Be a lawful U.S. resident
- Have a valid Social Security number
- Have a minimum credit score of 580
- Meet debt-to-income requirements (typically less than 43% total DTI)
- Intend to use the home as your primary residence
What is the minimum down payment on an FHA loan?
The minimum down payment is just 3.5% of the purchase price. So if you buy a $300,000 home, your down payment would be as low as $10,500.
Is a 20% down payment required for an FHA loan?
No, 20% down is only required on conventional loans. The low 3.5% minimum down payment is what makes FHA loans appealing to many buyers.
Is mortgage insurance required for FHA loans?
Yes, you will pay an upfront mortgage insurance premium at closing of 1.75% of the loan amount. You’ll also pay an annual mortgage insurance premium included in your monthly payments.
How long do you have to pay FHA mortgage insurance?
With less than 10% down, you’ll pay the monthly mortgage insurance premium for the full life of the loan. At 10-15% down, it stops after 11 years. Over 15% down, it stops after 10 years.
What credit score is needed for an FHA loan?
The minimum FHA credit score requirement is 580. But each lender sets their own guidelines, so scores of 620+ are often required to qualify. The higher your scores, the better your loan options will be.
Can I get pre-approved for an FHA loan?
Yes, securing an FHA pre-approval from a lender early in the home buying process is recommended. This shows sellers you are a serious buyer who has been validated by a lender.
How do I find FHA-approved lenders?
Your realtor can recommend lenders who specialize in FHA loans, or you can search HUD.gov. Focus on finding an experienced FHA lender who can walk you through every step.
What FHA inspection requirements should I know about?
An FHA appraiser will evaluate the home to ensure it’s safe, sound, and meets HUD standards. Any needed repairs must be completed before closing. I advise reviewing the seller’s disclosures closely.
Can I use gift funds for an FHA down payment?
Yes, gifts from family members are an acceptable source for your FHA down payment. Common requirements are documenting the transfer of funds and signing a gift letter.
Hopefully these answers help provide a solid overview of FHA loan basics! Please reach out with any other questions.
Partner With a Realtor to Make Your FHA Loan Journey Seamless
There are clearly a lot of moving parts when it comes to obtaining an FHA mortgage. Having a real estate agent as your trusted partner makes the process so much smoother. Take the first step by connecting with
Are FHA Home Inspections Difficult?
FHA home inspections are not as difficult as you may think. The FHA inspector will look for things like proper wiring, plumbing, and making sure the home is free of any health and safety hazards.
How Much of a Down Payment Do You Need?
The minimum down payment for an FHA loan is 3.5%. However, you can qualify for an FHA loan with a credit score as low as 580 and a down payment as low as 10%.
It’s also important to remember that you’ll need to pay for mortgage insurance with this type of loan. This is just one of the many costs you’ll need to factor into your budget when purchasing a home.