FHA Loans
First things first: an FHA Loan is a mortgage that is insured by the FHA (or Federal Housing Administration). FHA Loans have no income limits, but require a 3.5% minimum down payment and a maximum loan amount of $770,500 on Oahu in 2023 for a one-unit property. If the property is a condominium, it must be on the FHA-approved list. In addition, an upfront mortgage insurance premium is financed into the loan, and seller concessions can be up to 6% of the sales price.
Who Is Eligible for FHA Loan?
Often popular among first-time home buyers, FHA loans appeal to those who may not have a lot of savings or might have some credit challenges (usually with a credit score of 580 or higher, although those with scores between 500-579 can still qualify, but need to make a larger down payment.) Also, with FHA Loans, gifts are allowed (such as financial support from family, employers or charitable organizations).
Features
✔ Increased mortgage opportunity:
Since the FHA insures mortgages (providing an added layer of protection) a lender is more apt to offer favorable terms to borrowers who might not otherwise qualify for a home loan.
✔ Credit challenges:
Those with lower credit scores than required for a conventional loan can often qualify for an FHA loan.
One can also buy sooner after a big event like a bankruptcy, foreclosure, or short sale than with a conventional loan.
✔ Higher debt-to-income ratio:
An FHA Loan allows for debt-to-income ratios as high as 56.9% (in other words, your monthly debt can’t be more than 56.9% of your income, pre-tax.)
