An FHA loan is basically a type of mortgage that is backed by the government. It’s insured by the Federal Housing Administration (FHA). These loans benefit low-to-moderate income who have trouble paying large down payments. At the same time, it protects lenders from incurring losses in case their borrowers default on loans.
In 2018, it was announced that borrowers who had a minimum credit score of 580, could get a loan that covers 96.5% of the value of the house they intended to buy.
If they were slightly short of the credit score requirement, they would have to pay at least 10% of the down payment. The remaining 3.5% of the house’s value is part of the down payment and can be paid in the form of a grant or gift. This specific clause makes FHA loans very popular amongst first-time homebuyers.
FHA loans offer options for home purchases, renovation project financing, refinancing and reverse mortgages too.
Connecticut FHA Loan Requirements:
- The minimum credit score requirement for an FHA loan if 580. Applicants with a credit score just shy of 580 (500-579) can still qualify for an FHA loan, but will have to pay a significantly higher down payment – up to 10% of the total value of the house.
- If the borrower meets the credit score requirement of 580, they will still have to pay 3.5% of the total value as down payment.
- Your DTI (Debt to income) ration needs to be 43% or less to qualify for the FHA loan in Connecticut. There are rare circumstances where a DTI of 50% will be accepted.
- Applicants will also need to submit documentation showing that the property meets the safety and structural standards of Connecticut.
The loan limitations vary from county to county. There are 8 counties in Connecticut; the minimum of the Connecticut loan is $294,515 (for a 1 bedroom house in New London County) while the maximum is $1,156,650 for a 4 bedroom house in Fairfield County).
Borrowers whose applications have been accepted will have to pay different MIPs (mortgage insurance premiums):
- 75% of the total value of the property accounts for the up-front-premium. The FHA will automatically add this to your total mortgage amount).
- You will have to make monthly payments (which will add up to your total mortgage amount). The monthly payments range from 0.45% to 1.05% of the annual mortgage balance. The premiums depend on various factors like the loan-to-value (LTV) ratio, the total loan amount and the stated length of the mortgage.
Benefits of an FHA loan in Connecticut
Home buyers that are investing in property for the first time are able to purchase properties despite low credit scores. FHA loans reduce their down payments sufficiently.
First-time home buyers can qualify for FHA loans with just a credit score of 580 and may only have to pay a down payment of 3.5% of the total value. Those who already have FHA loans can choose to pull out of the cash-out refinance loan and opt for streamline refinance options.
Home buyers who wish to take on a refurbishment project, can do so with an FHA 203 loan that lets them integrate their purchase and remodeling costs into a single loan.
e-Finance Mortgage LLC offers financial services for current home owners and first-time buyers in Connecticut. We provide initial or refinancing FHA loans.
To get competitive rates and FHA loan terms that best suit you, contact us today to begin your application process!