FHA loans are suitable for home buyers with low to moderate incomes. The U.S government guarantees this loan. In Michigan, counties of Alcona, Alger, Allegan, Alpena, among others, the FHA 1-unit limit is $420,680. Currently, low-income families make up 75.4 percent of Michigan’s population. An FHA loan doesn’t really lend the money. Instead, it promises that a lender can cover losses if the borrower defaults. You can apply for an FHA loan in Michigan at a local mortgage company with a 3.5 percent down payment plus closing costs and pre-paids. You can apply for this loan even if you have a low credit score. But you should fulfill both the FHA guidelines as well as that of lenders to qualify for this loan. Below are some essential things you should know about this loan.
What Are the Prerequisites for an FHA Loan?
These loans are pretty easy to qualify for. The best mortgage agencies in Michigan offer these loans. When deciding to get this loan, you must know about the debt-to-income ratio. It displays the amount of your monthly income required to cover your monthly debts. To compute it, add all your monthly payments. Then divide it by your gross monthly earning. Some essential FHA prerequisites are as follows:
- You must be above 18 years.
- You must have 500 credit scores in case of a 10 percent down payment.
- If you have a 3.5 percent down payment, you should possess a 580 credit score.
- You must have an optimal DTI of 43 percent.
- Your appraisal must be FHA-approved.
- You must have a steady income for at least two years.
- You must be a primary resident of your home.
- You must obtain mortgage insurance.
- Adhere to the loan limit as per the Michigan geographical regions.
- You must not have applied two years after a bankruptcy or three years after a foreclosure.
The Different Kinds of FHA Loans
Some popular versions of Michigan FHA loans are given below.
- A primary home mortgage loan 203(b) is for refinancing or buying your main house. You need to fulfill the standard FHA qualifications.
- Adjustable-rate mortgages – They share the usual FHA qualifications. These have 1-3-5- and seven and 10-year fixed rates prior to adjusting the interest rate.
- Streamline refinances allows you to refinance FHA mortgages with fewer documentation. You shouldn’t be delinquent on your existing mortgage.
- Condominium mortgages – These are available, but not every condo is able to qualify for them. Some condos prefer not to get FHA approval. But this only makes qualifying each unit challenging.
- Manufactured home loans – They share the exact requirements. However, they are only available for a period of up to 20 years. In 2019, the loan limit for $69.678.
- Energy-efficient mortgages – They comprise funds to enhance the energy efficiency of a house. These funds are according to the percentage of the home value. For them also, there’s the application of the standard qualification.
- Reverse mortgages are for seniors and need the homeowner to possess equity in the home. They should be not less than 62 years old. These loan amounts are based on appraisal, age, and existing interest rate.
If you meet all the prerequisites of the loan, you can look into an FHA loan in Michigan from a mortgage company that has a good reputation in the industry. Such an agency sets exact buying limits and their approval and turn times are even speedier than banks. As the experts know about the local market, they can guide you well on the correct type of FHA loan.