If you're looking to purchase a home in Birmingham Alabama, you may have heard about FHA loans. But what are they? And are they right for you? Here's everything you need to know about FHA Loans.
What is the downside to a FHA loan? What are the benefits?
FHA loans are loans backed by the Federal Housing Administration(FHA) and require lower credit scores and in most cases a low down payment (3.5% of the purchase price) than a conventional mortgage loan. The FHA loan is a great option for someone with lower credit and usually a first time home buyer.
How do you qualify for an FHA loan and what are the requirements?
Qualifying for an FHA Loan is pretty straight forward. You need to have a job that brings in enough income to take care of your debts. The max debt to income ratio you can have to qualify is 43-50%. This means that if you bring in $5,000 a month from your job, your monthly expenses cannot be greater than $2,500 a month (car notes, mortgage note, credit cards, etc.) FHA Loans also require you to have a credit score above 580.
How much can you borrow with Alabama FHA loans and what are the interest rates?
What is the max FHA loan amount in Alabama? The max you can borrow with an FHA loan is $420,680. The rates fluctuate depending on the market so it is best to get in contact with a mortgage lender to see what the current rates are at the time. The rates on an FHA loan are usually about 1% lower than a conventional loan. The down side with that lower rate, is that you have to pay mortgage insurance for the life of the loan (there are some exceptions with this; get with an FHA loan officer to see your options)
What are the closing costs associated with an FHA Mortgage loan and how can you reduce them?
Closing costs for FHA loans are really just about the same as any other type of loan program. The great advantage of FHA loans is that the seller of the home can help pay those closing costs up to 6% of the purchase price. Closing costs usually run $5,000 to $10,000. Closing costs can go up or down depending on the vendors you use such as the title company, home insurance provider, inspector, appraiser etc.
Are there any Alabama FHA loan limits OR restrictions on who can qualify?
You can only get an FHA Loan if the home you are buying is going to be your primary residence. Other than that you just need a 580+ credit score, funds for the down payment, and have that debt to income ratio below 50% .
How long does it take to get approved for an FHA loan and close on a home purchase?
You can get approved from an FHA Approved Lender sometimes same day if the FHA Lender has time to process your info right away. Be sure to have bank statements, pay stubs, and W-2's handy to speed up the process. Once you find a property and get your offer accepted, you should anticipate no more than 45 days to close. Most FHA loan officers can issue a clear to close within 30 days or less. Stay in touch with your FHA loan officer to ensure there are no significant delays through out the home buying process.
How to get preapproved for an Alabama FHA Loan
Congratulations on your decision to become a homeowner! You’re about to embark on one of the biggest (and most exciting) adventures of your life. As you start the process, it’s important to get pre-approved for a mortgage so you know how much house you can afford. Please contact us if you have any questions or need help getting started.
Connect with approved Alabama FHA lenders
Complete a preapproval application (5-10 minutes)
The FHA Lender will call you to discuss the best loan programs available
Contact a local Birmingham AL real estate agent and begin touring homes