Are you considering buying a foreclosed home? Wondering if it’s possible with an FHA loan? If so, you’re in the right place!
Buying a foreclosed home can be financially beneficial because it may allow you to purchase a home at a lower price. Additionally, if you buy a home that needs work and then rehabilitate it, you can increase its value and build equity quickly.
That being said, it’s important that you’re aware of the FHA loan guidelines that apply to foreclosed homes. Below, we’ve provided some information that we hope will be useful to your endeavors.
Can I Use an FHA Loan to Buy a Foreclosed Home?
Yes! You can buy a foreclosed home with an FHA loan, so long as the property meets the FHA’s requirements. This means it must be in livable condition according to the HUD’s minimum property standards. It must also be able to pass an FHA appraisal.
If the property you want to buy needs major repairs, you may have to take an alternative route. Instead of getting a standard FHA loan, you may need an FHA 203k loan. These loans can be used to fund the purchase of the home as well as the repairs.
FHA Loan Requirements
FHA loan requirements apply to more than the property itself. You, as the buyer, must also be eligible for an FHA loan. That means in addition to purchasing a property that’s in livable condition (unless you’re applying for an FHA 203k loan), you must also be able to meet other FHA loan guidelines such as:
- Credit requirements: You will need to have a credit score of at least 500 to qualify.
- Down payment: You will most likely need to be able to put some money down towards your home purchase. The FHA requires a downpayment of 3.5% for borrowers with credit scores of 580 and higher. If your credit score is lower than that, you may need to put as much as 10% down.
- FHA mortgage insurance: You’ll have to pay for FHA mortgage insurance, also known as an FHA mortgage insurance premium (MIP). This fee is charged in order to protect the lender’s financial interests.
- Income requirements: You must also meet the guidelines for FHA income requirements. This means you need to have a steady income and a good employment history. Additionally, your debt-to-income ratio cannot exceed 43%.
Talk to an Expert Today!
FHA loan guidelines may seem complicated, but they’re really nothing to stress about. If you have questions about buying a foreclosed home or FHA requirements, please do not hesitate to give us a call!