The Federal Housing Administration is a government organization that insures mortgage loans. Contrary to popular belief, they do not service the loan themselves. The FHA insures loans for approved lenders and those lenders provide your home loan.
As a result, there are some minimum FHA guidelines in El Paso for the different types of loans they’re willing to back and insure. This helps prevent losses, poor lending practices, and high default rates which would lead to higher costs for everyone. Sometimes lenders will also enforce an added layer of protection (called an overlay) that applies their own minimum guidelines to their lending practices.
Why do FHA loans have guidelines?
After the 2008 mortgage crisis, lenders tend to be a lot more careful about their lending practices. Guidelines serve as a way to help cover lenders (and the FHA) in the event that a loan goes into default. It’s basically a huge cost-risk assessment where they’re always trying to balance the people they offer payment assistance to within a “safe” threshold of risk while also keeping default rates low. How well they manage this balancing act can impact anything from interest rates to FHA claims – making things more expensive for everyone.
What is a Federal Housing Administration Loan?
FHA loan programs in El Paso are designed to help low and moderate income families who do not meet the income requirements for fixed mortgages and conventional home loans with stricter underwriting guidelines. FHA mortgage loans, like other home buyer assistance programs, make it easier to break the renter’s cycle and get people investing in their own homes.
If you’re looking at FHA loans in El Paso, TX and you’re considering buying an investment property or home in El Paso, it’s a great time to shop for a home loan. Interest rates are down to as low as 3.99% on a 30 year fixed mortgage. An FHA mortgage loan can help you get a new home or investment property with little to no money down. And there are even down payment assistance programs in El Paso that can give you an extra buying boost if you need it.
Should I get an FHA loan?
FHA insured mortgages are a good option for many people, since a lot of us can’t secure a traditional 80% mortgage without 20% to put down. And loan programs that require smaller down payments are generally reserved for those with higher credit scores in the 740+ range. This makes FHA loans El Paso are a solid option for lower income home buyers who meet the minimum FHA loan requirements, making it a viable alternative to roughly 20% of new and existing home sales.
There are 3 main types of FHA loans in El Paso this year.
The FHA 203b loan is the most common FHA loan program for home buyers. As long as you meet the borrower and property requirements, this is probably the loan for you.
This FHA loan program is for victims of major disasters – PDMDAs (Presidentially Declared Major Disaster). These loans are for people whose homes were destroyed or irrevocably damaged. This allows borrowers to purchase a new home or start on their rebuilding process.
This loan allows home buyers to finance up to $35,000 into their mortgage to improve, upgrade, or repair their home. So this would be a great option for fixer-uppers, renovations, or restoration home projects.
There are a few other types of FHA loan programs that aren’t directly related to buying a new home, but may be useful to existing homeowners or seasoned property owners and property flippers.
El Paso FHA Loan Requirements
- The property must be appraised by an FHA-approved appraiser
- The loan is for primary residences only but can include two, three or four units (ex. duplexes, quadruplexes)
- The property must be safe, sound and secure, in compliance with minimum property standards as defined by the U.S. Department of Housing and Urban Development
- The borrower must be a legal resident of the U.S. and have a valid Social Security number
- The minimum credit score of 580 with a down payment of at least 3.5%, or a minimum credit score of 500 with a down payment of at least 10%
- The borrower may not have delinquent federal debt or judgments, or debt associated with past FHA loans.
- The borrower must have steady employment history
- Documentation is required if the down payment was gifted by a family member
- The borrower must have a debt-to-income not exceed limits of 31% for front-end and 43% back-end ratio (some exceptions may apply)
- Any judgments or collections on the credit report must be resolved or satisfactorily explained
The Texas Mortgage Pros can help you find a home loan in El Paso, TX that works best for your situation, whether that’s an FHA loan program or another home lending option that helps you purchase or upgrade your home. We can help you buy your dream home, get the funding you need for you renovation project, or get your hands on your next investment property, so give us a call at 866-772-3802 to get started today.