The National Housing Act of 1934 developed the Federal Housing Administration (FHA) with the goal of improving the housing market. By insuring home loans offered by approved lenders, the FHA makes it possible to receive great rates and qualify with less than ideal credit. Additionally, this insurance protects lenders from borrower default. The FHA offers loan options for purchases, refinances, and special renovation projects. Andrew O’Fee – The Yankee Closer offers great rates on FHA loans throughout Memphis.
FHA loans have become a popular choice among first-time homebuyers in Tennessee given their relaxed down payment and credit requirements. Many people can qualify for their first FHA loan with a credit score of 580 and a down payment of only 3.5%. If you do not have the cash available to meet the down payment requirement, it can even be gifted by family members. Loan limits vary by county and can range from $294,515 up to $679,650 in high-cost areas.
Tennessee FHA Loan Requirements
- Credit Score – A minimum credit score of 580. Scores between 500 and 579 may be considered with a higher down payment.
- Debt-to-Income Requirements – A debt-to-income (DTI) ratio of 43% or less. Special circumstances may allow a DTI of up to 50% to be approved.
- Down Payment – 3.5% of the purchase price if credit requirements are met.
- Property Requirements – All properties must meet certain safety, security, and soundness (structural integrity) requirements.
With each FHA loan, two mortgage insurance premiums (MIP) must be paid. This mortgage insurance is what makes the benefits of the FHA loan program possible. One is an up-front premium of 1.75% of the purchase price. This premium gets added to your total mortgage amount at closing. The second premium is paid monthly as part of your mortgage payment. This premium will be between .45% and 1.05% of your annual mortgage balance. The rate is unique to each buyer and will depend on factors such as total loan amount, length of the mortgage, and loan-to-value (LTV) ratio.
For those who already have an FHA loan, both cash-out refinance and streamline refinance programs are available. To help protect borrowers, streamline refinancing is only available if the borrower will save money through the refinance. For special renovation projects, the FHA 203k loan is an option as well. The FHA 203k loan is a unique type of home loan that allows a borrower to combine the purchase of a home and the cost of renovations and repairs into a single mortgage.
Whether you are a current homeowner looking to refinance an existing FHA loan, or a first time-homebuyer looking to purchase your very first home in Tennessee, Andrew O’Fee – The Yankee Closer can help with all of your FHA loan needs. Contact us today for more information on FHA loans throughout Memphis or to begin the pre-qualification process!