FHA Loans
What are 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 Loans?
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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
The cash value growth within the policy can generally be accessed without paying income tax, Policy loan proceeds are typically tax-free, as they are considered borrowed funds rather than income. The interest paid on policy loans can be tax deductible when used for investment purposes.
