FHA loans are basically government-backed mortgages. Compared to other types of mortgages available in the market, FHA loans have more lenient eligibility standards and lower down payment requirements, making them very useful for low-to-moderate income families. These loans also prevent lenders from incurring costs from borrowers who default on their loans.
In 2018, new eligibility requirements were announced for FHA loans. Borrowers with a minimum credit score of 580 can qualify for a loan that covers 96.5% of the total value of the property. The remaining 3.5% of the total amount will have to be paid by the borrower as down payment. This 3.5% can also be paid as gift or grant. In some circumstances credit scores between 500–579 can also be accepted but the borrower will have to pay 10% of the total value as down payment.
Borrowers have the option of picking from different types of FHA loans. Depending on their needs, borrowers can choose from FHA loans for home purchases, for the financing of refurbishment projects, refinancing and reverse mortgages.
Requirements for an FHA loan in Tennessee:
- The minimum credit score required for an FHA loan in Tennessee is 580. Applicants with a credit score of slightly less than 580 (500–579) can also get an FHA loan but they will have to pay a down payment of a sufficiently higher amount.
- Those with a credit score of 580 or higher can get away with paying just 3.5% of the total value as down payment but those with low credit scores will have to pay 10% of the total value as down payment.
- To get an FHA loan in Tennessee, you will have to have a DTI (debt to income ratio) of maximum 43%. In rare situations, a DTI of 50% can also get accepted.
- All applicants will need to supply documentation to prove that the property they wish to purchase meets the structural and safety requirements of Tennessee.
The loan limitations in Tennessee differ from county to county.
Tennessee is a massive state with 95 counties. The minimum limit for an FHA loan in Tennessee is $294,515 for a 1 bedroom unit in Anderson County while the maximum limit for an FHA loan in Tennessee is $950,950 for a 4-bedroom unit located in Cannon County.
Borrowers that have qualified for an FHA loan need to pay two different types of MIPs (mortgage insurance premiums):
- 75% of the total cost of the house is the up-front premium. The FHA adds this amount to the total mortgage.
- The second type of MIP consists of monthly payments that are considered a part of the total mortgage payment. Depending on the loan amount, the length of the mortgage and the LTV (loan to value ratio), these premiums can be between 0.45% to 1.05% of the annual mortgage balance.
Benefits of getting an FHA loan in Tennessee
It allows first-time home buyers to purchase property with reduced down payments despite having a low credit score. If you’re already a home owner with an FHA loan, you can choose the cash-out refinance loan and can go for a streamlined finance options.
Buyers who’re looking to refurbish a house can begin an application for a 203k loan which lets them combine the costs of the purchase and refurbishment into one loan.
e-Finance Mortgage LLC provides financial services for people who already have homes and for first-time buyers in Tennessee. We offer both initial and refinancing FHA loans at competitive rates with terms that are in our clients’ best interests.
Get in touch with us today and we can get your FHA loan application started!