FHA loans in New York
New York is one of the great cultural hubs. Whatever you’re looking for, whether it be great sports stadiums, incredible theatres or world famous museums and galleries, the Big Apple has them all. It’s no wonder that people are constantly attracted to this remarkable city. Of course, increased demand means an increase in prices. And a house in New York does not always come cheap. But that doesn’t mean that owning a property here is impossible. It just means you might need a little bit of help along the way. That’s where the FHA (Federal Housing Administration) loan comes in. Since 1934 the FHA have been helping people get their first mortgages. Here’s how they do it.
How does an FHA loan work?
An FHA loan is a government-insured mortgage that is designed to help people who are struggling to borrow. As the loan is backed by the FHA the borrower’s initial down payment is smaller and so their credit rating can be a little bit lower. FHA loans have become increasingly popular in recent years with down payments as low as 3.5 per cent of the overall purchase price with a credit score of 580.
What are the benefits of an FHA loan?
There are numerous advantages to taking out a loan approved by an FHA-backed lender. These include:
- A borrower’s credit rating can be lower than required for a normal loan.
- Down payments can be as little as 3.5 per cent of the overall price of the house.
- Credit scores can be as low as 580.
- The loan is often assumable, meaning that if the borrower chooses to sell the property, the buyer “assumes” the loan they have taken out.
Is it right for me?
The right loan at the right time is always a beneficial thing, but how do you know when the time is right to apply for a loan? When it comes to FHA loans applicants are generally younger and often first-time homeowners who are struggling for cash. That is not to imply the loans are solely for first-time buyers. People who have gotten into bad financial situations, who are facing foreclosure or who have failed to qualify for a conventional loan can also benefit from an FHA loan.
If you do qualify for the advance there are a few things you should be aware of. FHA loans, by definition, are easier to come by than normal ones, so you will be asked to pay back an additional monthly insurance premium which is added into your monthly loan payment. PMI (Premium Mortgage Insurance) is required with all FHA home loans unless you put down at least a 20% deposit. At closing you also have a one time funding fee as well. The fees are not necessarily huge and are somewhat offset by the convenience of the FHA loan itself, but they should always be taken into account when deciding whether to take out the credit.
Am I eligible?
If you are definitely going down the FHA loan route, then you will want to know whether you are eligible or not. The first thing you’ll have to do is prove to your lender that you have the ability to pay back your loan. You’ll have to show you’ve been earning a steady income for at least two years and are also in current employment. As you might expect you will also be required to a have a valid Social Security number and be a lawful resident in the United States. Once the process itself is kicked off, the FHA will send someone out to appraise the property to ensure that the property meets their minimum standards. These appraisals are somewhat more strict and everything needs to be in order before the appraisals are finalized.
There are a couple of other potential issues when it comes to qualifying for this kind of loan. You will need to be at least two years clear of bankruptcy and thus have established good (if not great) credit. You must also be three years clear of foreclosure. Although exceptions can be made in both these case though mitigating circumstances will have to be proved. In certain cases, a 20% deposit can get you through the toughest situations.
What if I have a low credit rating?
A poor credit score should not disqualify you from getting an FHA loan. You can take one out with a rating as low as 580. However, if your score is lower than that you could still qualify for the loan, although your down payment will be a little higher. For credit scores between 500 – 579 borrowers will have to make a down payment of 10 per cent of the overall price of the property. Depending on the credit score there may be more requirements.
What is the lending limit?
As always lending limits differ from place to place. In New York, the limits are decided county by county as well as by property.
In most recent times here in New York, there are no limits for an FHA loan. The LTV (Loan to Value) may however change as you are in need of a higher loan. For example, if you want a $2,000,000 FHA loan we can get you there with a 30% deposit. So for a $3,000,000 purchase you would require a $900,000 deposit and the loan would be for $2,100,000. Or a LTV of 30%. Don’t worry if this sounds a little confusing, we are here to help guide you every step of the way in your best interest.
Pre-qualifying for a loan is often a good way for a borrower to get an idea as to what you can afford and how much you’ll be able to borrow.
Why choose us?
New York is a wonderful place to own a home, but like anything that is worth doing it is not always easy to accomplish. We know how stressful negotiating the world of home owning can be. Applications, mortgage rates and down payments can all encourage stress levels to rise as high as the roof of the home you are trying to buy. We have decades of experience helping people make their dream home a reality and we do it with the minimum amount of fuss possible. A large percentage of our loans are FHA home loans so you are in very good hands.
If you have any questions about mortgages, are wondering whether you are eligible or want to know more about FHA loans in particular, feel free to get in touch and we’ll do our best to any and all questions.