What is a Louisiana FHA Loan?
A Louisiana FHA loan is an FHA-insured home loan in the state of Louisiana. FHA loans are ideal for first-time home buyers because they are backed by either the Federal Housing Administration (FHA) or the US Department of Housing and Urban Development (HUD), who will provide a portion of the payment in case the borrower finds themselves unable. This government-guarantee means that FHA loans feature more relaxed requirements, given that lenders are at less of a risk than with conventional loans.
Requirements for FHA loans are therefore quite lenient; lower rates and down payments, eligibility for borrowers with low credit scores, and the option for down payments to be made by a family member or friend make FHA loans a popular route for individuals looking to purchase a house for the first time (though they can be used for other purposes, such as paying for renovations or refinancing a mortgage). For more info on how much your first home can end up costing you, check out our mortgage calculator.
FHA loans feature low requirements for applicant's thanks to government-backing and can be accessible to applicants with credit scores even below 580, or who have filed for bankruptcy or loan foreclosures. That said, requirements will differ depending on an applicant's financial situation, and such conditions may effect changes to other details of a loan agreement. Applicants with credit scores at or above 580, for example, will be eligible for a down payment of only 3.5%, while scores lower than these will tend to require down payments of 10% or higher.
Similarly, it will generally be expected of borrowers with histories of bankruptcy or foreclosures that a period of two years has passed since such events, during which time regular employment and debt payments have been maintained. In the same vein, FHA loans will be accessible to borrowers with a front-end ratio (mortgage debt-to-income ratio) of 29% - 40% and a low-end ratio (general debt-to-income ratio) of 43% - 50%, depending on other aspects of their financial standing.
Further property-related requirements will apply to applicants seeking to use their FHA loan for purchasing a house. Most common are the stipulations that applicants must intend to live in their property, that it must be 1-4 units in size, and that an appraisal be made meeting health and safety regulations.
Like FHA loan requirements, rates will depend on the applicant's financial standing, such that better standing will generally equate to lower rates (for advice on keeping your credit score up, see our definitive guide to rebuilding your credit). The details of the loan itself will also influence its rates. Longer loans, for example, will tend to have lower rates, while rates will likely be higher for shorter loans.