Take a Look at the Important Information about FHA Loans for 500 Credit Score


How do you start the FHA application process? What are the basic things to remember?

The Federal Housing Administration insures an FHA loan, and you can get hold of a 3.5% down payment. When you are looking for a house for the first time, this is the perfect program. The FHA loan 500 credit score Chicago, IL is easy to qualify and anyone with bad credit can apply. So, in this article, we mention the essential information you must remember before applying for an FHA program.

The Way FHA Loans Work

15-year and 30-year fixed-rate FHA loans are the most popular in the market. The underwriting standards require cash savings and a good credit rating from homebuyers. However, the FHA mortgage insurance premium is pretty much unavoidable. FHA loans have gained this momentum because of being a loan for low- to average-income borrowers. Since most of them are risky buyers, insurance premium comes as protection. And mortgage insurance premium is applicable when the down payment is less than 20%.

So, you should prepare for an annual mortgage insurance premium and upfront mortgage insurance premium. The annual mortgage insurance premium ranges between 0.45% and 1.05% of the loan amount. This totally depends on the LTV ratio and loan term. Another one, the upfront mortgage insurance premium, is usually around 1.75% of the loan value. You can ask the lender for rolling it into the loan amount.

But don’t worry – the insurance premiums go away after completing 11 years. FHA loans with an LTV ratio of more than 90% carry the insurance till the completion of payment.

Applying for an FHA Loan in Chicago, IL?

FHA buyers can only get their mortgages from FHA-approved lenders. This means they should prepare for paying various costs and underwriting process. You can find FHA loans for 500 credit scores from multiple sources including credit unions and banks.

Meanwhile, you should be careful about your budget. Before submitting the application to an FHA lender, you must figure out how much home you can afford. Considering monthly expenses, and current income, you can understand how much the monthly payments might be. Besides keeping different down payments in mind, you should use a mortgage calculator. Also, be on the lookout for exciting offers and getting approved.

In the end, do not leave out the paperwork for the last moment. You will be handed over a huge chunk of money so the lenders need to go over your financial situation. In case you have queries, contact Clear Lending.

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