What is a New York FHA Loan?
A New York FHA loan is government-backed home loan obtained in the state of New York. What is unique about FHA loans is their lenient application requirements and financial demands. This leniency is on account of their being backed by government agencies. That is, while FHA loans are provided by private lenders, they are backed by either the Federal Housing Administration (FHA) or the US Department of Housing and Urban Development). This means that, if the borrower finds themselves unable to make the payments, they will receive government assistance, meaning a reduced loss for the lender. This low-risk factor for lenders means low-requirements for borrowers. For example, applicants with a credit rating as low as 580 can acquire an FHA loan with a down-payment of only 3.5%. Furthermore, this down-payment can be made by someone other than the borrower (e.g., a family member or friend) as a gift. These and other conditions make FHA loans an ideal option for first-time home buyers. 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. You can also check out our mortgage calculator to help determine the cost of your home loan.
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While the average mortgage lender will require that the borrower has a credit score higher than 700, FHA loans are accessible to borrowers with scores as low as 580. The latter score will generally require a down-payment of 3.5%, while a score below this will require a higher down-payment, usually about 10%. As for credit history, applicants are eligible without one– simple providing proofs of payments and utility bills is enough to qualify. Further, poor credit histories do not exclude applicants from obtaining an FHA loan, so long as a particular period of time has passed since such events as bankruptcies or foreclosures (generally 1-3 years), and it can be shown that such misfortunes were due extenuating circumstances. Additionally, while most conventional loans require a debt-to-income ratio of 28%, FHA loans are accessible to borrowers with a DTI of up to 30%.
If an applicant wishes to use a New York FHA loan to buy a home, there are certain stipulations relative to the circumstance. For example, the borrower must intend to live in the property (as opposed to renting it) and must move in within two months of securing the loan. Similarly, applicants will require appraisals of the property which they intend to purchase, proving that such meets the requirements of health and safety codes.
Interest rates will vary from loan to loan, as when it comes to private lending there is no one standard rate. Rather, rates will depend on various things, such as the details of the loan itself, and the financial standing of the borrower. In general, rates will be lower for longer loans, and for applicants with better credit ratings/financial stability (check out our definitive credit rebuilding guide).