FHA Loans-Scottsdale, AZ
Scottsdale, Arizona is often considered one of the best cities to live in the state. Having the opportunity to own a home in this city is a wonderful privilege.
However, buying a home can be challenging, especially if you have limited resources. Qualifying for a conventional loan may be out of reach, but FHA loans in Scottsdale can still make your dream of homeownership come true. Plenty of borrowers can benefit from this option, especially with the median sale price of $821,000 pricing many buyers out of the market.
FHA Loan Differentiators
An FHA loan is much different from other mortgages like conventional loans or VA loans. FHA lenders in Scottsdale like District Lending make it possible for more individuals and families to become homeowners even when it feels out of reach.
Here are a few FHA loan features.
Insured by Federal Government
Most conventional loans are either backed by Fannie Mae and Freddie Mac or a government entity, though jumbo loans are not insured by any. When the federal government insures loans through the Federal Housing Administration (FHA), this is known as an FHA loan.
Lower Standards Than Conventional
FHA-approved lenders specialize in making loans accessible to people with limited resources or low credit scores. When a borrower defaults on payments, the lender inherits the loss, which is why mortgage lenders are hesitant to approve loans for risky borrowers. Since the government insures FHA loans, it can provide mortgage lenders with lowered risk, so the requirements for approval can be more flexible.
Property Requirements
While a conventional loan can be used to purchase various types of properties, an FHA loan has more specific requirements. For example, you cannot use an FHA loan to purchase a vacation home or investment property in Scottsdale, AZ.
Additionally, the home must be in a safe location, so where the property is could affect the approval status as well. Generally, this is not an issue in most of Scottsdale.
FHA Program Requirements
District Lending offers FHA loans because we believe that everyone deserves a chance at homeownership. However, there are still requirements that must be met to qualify for an FHA mortgage loan.
Down Payment
The minimum down payment for FHA loans is usually 3.5% of the total loan amount. While exceptions can be made to cost you less, it is very rare. The money you can pay upfront will determine the monthly costs and the total loan amount. You can pay up to 10% upfront for an FHA loan if you wish. If you need help with down payment assistance, the statewide HOME Plus program can help, as well as the Home in 5 Advantage Program that is available to low-income buyers.
Mortgage Insurance
Since you will be paying a smaller down payment with an FHA loan, lenders will require adequate insurance to be paid on the loan. This could be an upfront payment or rolled into your monthly premiums. Mortgage insurance helps protect the lender from a defaulting borrower.
Credit Score
A low credit score is often the main reason why buyers turn to FHA loans to acquire their homes. While conventional mortgages may require a score of at least 620, FHA loans can be approved for borrowers with a score as low as 500.
Debt-to-Income Ratio
A debt-to-income ratio is a measurement of how much monthly debt you have versus your monthly income. A higher ratio indicates that you may not have enough income to cover monthly mortgage payments. Fortunately, even if you have a DTI as high as 43-50%, you may be able to qualify for an FHA loan. This is a much more achievable standard than the 36% or lower standard for conventional mortgages.
Proof of Income
One of the factors necessary for FHA loans to be approved is proof of income. This demonstrates that you will be able to cover costs and is part of the DTI equation. Pay stubs, bank statements, credit history, and other information will be used to determine your income level.
Closing Costs for FHA Loans
Anytime you purchase a home, there are going to be closing costs. Closing costs can include payments like lender fees, attorney fees, title searches, property transfers, and realtor fees. Having to pay for these closing costs may affect the amount you can put in for a minimum down payment.
There may be room for negotiation with the seller or some closing cost payment assistance programs to help you cover these fees, or you can roll the costs into the loan amount.
Tools to Calculate FHA Loans Through District Lending
Free Quote
Are you starting to shop around in the somewhat competitive Scottsdale housing market? It might be easier if you understand what you can afford. We offer free quotes on FHA loans so you can make more informed decisions in your search for a new home. Don't forget that you can take advantage of payment assistance programs like the WISH program that offers grants to help cover down payments or closing costs, which we can tell you more about.
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Mortgage Calculator
FHA loans may be unique, but they still require monthly payments that can be difficult to estimate. Using our free mortgage calculator, you can play with variables like mortgage interest rates, down payments, insurance, loan term, and more to get a sense of what payments could look like.
Mortgage Calculator
Limits on FHA Mortgages
FHA loans make homeownership more accessible, but they do have limits. While markets vary and Scottsdale may have home values that are higher than the average prices across the state, you should be aware of the limits set on FHA loans so that you can be prepared as you look for a house.
FHA Loan LimitsServing the community of Scottsdale, AZ and the surrounding area
- Phoenix
- Tucson
- Scottsdale
- Sedona
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