What is an Idaho FHA Loan?
An Idaho FHA loan is a home loan in the state of Idaho that is insured by the federal government. If a borrower fails to pay an FHA loan, the Federal Housing Administration (FHA) or HUD, the US Department of Housing and Urban Development agree to pay lenders a portion of the balance of the loan. Having government insurance lowers the risk for the lender, which allows the lender to provide FHA loans with lower credit requirements, smaller down payments, and better interest rates. Most notable of these benefits is the smaller down payments; FHA loans can have down payments as small as 3.5%, while many conventional home loans as for 20% down. The down payments can also be paid for as a gift from a friend or family member; this makes FHA loans ideal for first-time homeowners. The primary way in which FHA loans differ between states is in the size of their maximum limits, which are set for each county. Below, we at Online Loans have broken down the assorted information available across the web into a convenient need-to-know to make getting you FHA loan as simple as possible. Our mortgage calculator is also a useful way of seeing how much your home loan will end up costing you in the end.
Since they are insured FHA loans tend to have more lenient requirements than conventional loans. However, both the lender and the insurer need some assurance that the borrower will be able to repay the loan. To qualify for an FHA loan, you need to meet the minimum debt to income ratio requirements, and you need to have a good employment history. Your mortgage payment expense to income ratio needs to be 31% or less; this means that your monthly mortgage payments need to be less than 31% of your monthly income. Your total fixed payment to income ratio needs to be less than 43%; this means that the sum of all the debt payments you make each month (mortgage, car loans, student loans, etc.) needs to be less than 43% of your monthly income. Your current employer must have employed you for at least the last two years, and your overall employment history needs to have few gaps. To qualify for an FHA loan with a 3.5% down payment, you need a credit score of 580 or better. To get an FHA loan with a 10% down payment you typically need a credit score of at least 500, although exceptions are made for borrowers with worse credit scores or no credit history, if there is other evidence of financial stability.
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Since the lenders who give out FHA loans are private, they do not have to accept you just for meeting the FHA minimum standards. Most lenders have stricter standards than the FHA minimums. FHA loans are only given to US citizens and legal residents. The maximum limit of an FHA loan is determined by the type of housing and the county that housing is located in. In Idaho, the largest maximum limit is $1,307,175 for a four-unit home in Teton County. The smallest maximum limit is $294,515 for a one-unit home in one of the less expensive counties. FHA loans can only be used on the borrower's primary residence.
While conventional home loans can sometimes have variable rates and sometimes have fixed rates, FHA loans always have fixed rates. This means that the interest rate charged on the loan remains constant through the term of the loan, independent of variations in the prime interest rate. Typically fixed rates are slightly higher than variable rates because they offer the borrower more stability. However, this is offset by the insurance provided by the federal government for FHA loans. FHA loans with longer terms have higher rates because there is a higher risk that the prime interest grows during a longer term. Smaller loans tend to have higher APRs because the underwriting cost of a loan is about the same for a small loan as it is a large one. However, this cost represents a more significant percentage of a smaller loan. In addition to the interest rate FHA loans have to pay an annual fee for additional insurance, this fee is between .45% and .85% of the total loan. Since lenders are privately run, they set their own rates for FHA loans, which vary with different lenders and circumstances. In Idaho, you will typically see APRs between 3.7% and 5.7%.