FHA Loans

Government-Backed Financing Solutions

Understanding FHA Loans

FHA loans are mortgages insured by the Federal Housing Administration, designed to help first-time homebuyers and those with less-than-perfect credit achieve homeownership. These government-backed loans offer more flexible qualification requirements than conventional mortgages, making them an attractive option for many borrowers.

At SRK CAPITAL, we specialize in FHA loans and can guide you through the entire process. With down payments as low as 3.5% and credit score requirements starting at 580, FHA loans open doors for borrowers who might not qualify for conventional financing.

Key Benefits of FHA Loans

•Down payments as low as 3.5%

•Credit scores from 580 accepted

•Gift funds allowed for down payment

•Competitive interest rates

Check Your EligibilitySchedule Consultation

Credit Score Requirements & Down Payments

Credit Score 580+

Maximum Loan Amount

96.5% of home value

Minimum Down Payment

3.5% of purchase price

Best for: Most borrowers with fair to good credit. This is the most common FHA loan scenario, offering the lowest down payment requirement.

Credit Score 500-579

Maximum Loan Amount

90% of home value

Minimum Down Payment

10% of purchase price

Best for: Borrowers rebuilding credit who have saved for a larger down payment. Still more accessible than conventional loans.

Why Credit Score Matters

Your credit score directly impacts your down payment requirement. While FHA loans accept scores as low as 500, reaching 580 or higher significantly reduces your upfront costs. At SRK CAPITAL, we can help you understand your options and even provide guidance on improving your credit score if needed.

FHA Loan Requirements

FHA loans make homeownership accessible with more flexible qualification standards than conventional loans. Understanding these requirements will help determine if an FHA loan is right for you.

Credit Score

Minimum credit score requirements vary based on down payment:

580+: 3.5% down payment
500-579: 10% down payment

Down Payment

As low as 3.5% of the purchase price with acceptable credit.

Gift funds accepted from family, employers, or approved down payment assistance programs

Employment

Steady employment history for at least 2 years.

Gaps allowed with reasonable explanation
Self-employed: 2 years tax returns required

Debt-to-Income

Maximum DTI ratio typically 43%, but can go higher with compensating factors.

Front-end ratio: 31% or less
Back-end ratio: 43% (up to 57% with strong credit)

Property Requirements

•
Primary Residence: Must be owner-occupied within 60 days of closing
•
FHA Appraisal: Property must meet minimum property standards
•
Eligible Properties: Single-family homes, condos, townhomes, and 2-4 unit properties

Typical Closing Costs Include:

•Origination fees

•Appraisal fees

•Title insurance

•Credit report fees

•Prepaid property taxes

•Homeowners insurance

Note: Sellers can contribute up to 6% of the sale price toward closing costs.

Types Of FHA Home Loans

There are several types of FHA loans. The type you choose affects the type of home you can buy and how you can spend the money you get. This makes it especially important to be sure you're getting the right type of loan. If none of the loan types discussed below match your goals, you should consider another type of government loan.

Buying with an FHA Mortgage

When buying a home, you can put as little as 3.5% down if you have a median FICO^® Score of 580. If you have a score that low, you'll need to keep an equally low DTI.

If your median FICO^® Score is 620 or higher, you can qualify with a higher DTI. In no event will your DTI be above 57%.

FHA Rate & Term Refinances

Let's say you have a different type of mortgage and interest rates are falling. But when you go refinance to take advantage of the lower rates, you find your credit score has dropped.

An FHA refinance can be a good choice because of its less strict credit requirements. You can use a refinance to lower your rate. Or your loan term with a FICO^® Score median as low as 580, assuming you have a low DTI. You can also have more debt during the refinance if your median FICO^® is 620 or higher.

Depending on the amount of your home's equity, you can end up paying PMI for the life of the loan. This is on top of an upfront premium. If you're already in an FHA loan, you can save some money on your rate-and-term refinance.

FHA Streamline

An FHA Streamline Refinance allows homeowners with an FHA loan to do a rate-and-term refinance with a few special benefits. To start with, you can refinance to a lower rate.

The logic here is if you have a more affordable payment, then you will want to stay in your home. And pay it off, that is good for the FHA. You'll also usually get a lower mortgage insurance rate because the MIP for FHA Streamlines is 0.55% of your loan amount each year. Additionally, the upfront MIP is only 0.01%.

Another plus of FHA Streamlines is less documentation. Every situation is different, but because you already have an existing FHA loan, you won't need as many for them.

FHA Streamline Requirements

You must make at least six payments on your current loan before you can be approved for a Streamline. And 210 days must pass between the first payment you make on your current loan and the new Streamline.

Finally, you have to be up to date on your loan. For the purposes of an FHA Streamline, that means having no 30-day late payments in the last 6 months. Also, you can only have one payment that's 30 days late within the last year.

FHA Cash-Out Refinance

It's also possible to get a cash-out refinance with an FHA loan. The exception here is if the money is being used solely to merge existing debt. In that case, you only need a 580 qualifying score. If you convert your property value into cash, you leave at least 20% equity in your home.

If you're doing a cash-out refinance, you'll need full documentation of income and assets, as well as employment verification.

FHA 203(k) Loan

An FHA 203(k) loan allows you to buy a home and make renovations with a single mortgage. While it's possible to only make renovations with a 203(k) loan, this usually isn't the cheapest choice to do that.

The lowest FHA 203(k) loan balance allowed is $5,000, so you can't borrow less than this. Any home repairs or improvements you make must conclude within 6 months to stay within the loan's terms.

Some eligible projects you can do with a 203(k) loan include:

FHA 203(k) Eligible Projects

•Replacing old or dangerous flooring
•Making improvements to the home's modernization
•Adding or replacing roofing, sections of gutters or plumbing
•Making accessibility improvements for disabled people who live in the home
•Making structural repairs and changes to the home's foundation

There are two types of 203(k) loans: Standard loans and Limited loans. Limited loans need less paperwork for loan approval, while Standard loans give you more freedom to repair your property.

Find Your FHA Loan Option

Why Are FHA Loans Appealing?

Low down payment and lenient credit score requirements often make FHA loans attractive to home buyers, especially first-time home buyers.

Here are some benefits of FHA loans:

Flexible Credit Requirements

Credit score requirements are low compared to most other loans, with options for scores as low as 500.

Minimal Down Payment

Your lender can accept a low down payment of just 3.5% with credit scores of 580 or higher.

Second Chance Opportunity

Qualifying for these loans is still possible if you have had a bankruptcy or other financial issues.

Lower Closing Costs

FHA closing costs can be rolled into your loan using down-payment assistance programs.

Lower Debt-to-Income Ratio

FHA loans typically allow for higher debt-to-income ratios than conventional loans.

Assumable Mortgages

FHA loans are assumable, meaning a future buyer may be able to take over your loan terms.

Important Consideration

While FHA loans offer many advantages, they do require mortgage insurance premiums (MIP) for the life of the loan in most cases, which may increase your monthly payment.

Ready to see if an FHA loan is right for your homebuying journey?

Get Pre-Approved Today

FHA vs Conventional Loans

A Conventional Loan is a popular loan, and is used a lot, like FHA loans. Conventional mortgages have stricter loan requirements, broadly speaking, and typically have similar interest rates and with flexible mortgage insurance. Unlike FHA loans, conventional loan mortgage insurance ends when you reach 20% home equity. That is why borrowers often consider refinancing their FHA loan to a conventional loan.

Let's take a closer look at some of the differences between conventional and FHA loans:

Feature	Conventional Mortgage Loan	FHA Loan
Lowest Down Payment	3%	3.5%
Loan Terms	Ranges from 10 to 30 years	Fewer options than conventional but several options between 15 and 30 years
Lowest Credit Score To Qualify	620	500 with a 10% down payment; 580 and above with only a 3.5% down payment
Loan Limits	$766,550 in most areas; up to $1,149,825 in high-cost areas for a single unit	$498,257 (low-cost area) and $1,149,825 (high-cost area) for a single-family home, depending on location
Mortgage Insurance	PMI if down payment is less than 20%; no PMI if down payment is at least 20%	MIP upfront and monthly insurance throughout the life of the loan (or 11 years with a down payment of 10% or more)
Relative Interest Rate	Comparable to FHA, depending on borrower qualifications	Comparable to conventional, depending on borrower qualifications
Interest Structure	Fixed or adjustable rate	Fixed or adjustable rate
Who Backs The Loan?	Fannie Mae or Freddie Mac usually buy and guarantee the loan	Backed by FHA

Compare Loan Options

Is An FHA Loan Right For You?

If you're debating the pros and cons of an FHA loan vs a conventional loan, remember FHA loans are government-backed. Conventional loans are offered by Fannie Mae or Freddie Mac, which are government-sponsored enterprises that offer mortgage funds to lenders. But conventional mortgage loans are not government-backed like FHA mortgages. That is why FHA loans often have lower rates than conventional loans.

Key Factors To Consider

Here are some important factors to consider when deciding whether to take out an FHA or conventional loan.

Stricter Requirements

Besides the lower down payment, conventional loans have stricter requirements than FHA loans. You will need a higher credit score and a lower DTI to qualify for conventional loans. FHA loans, on the other hand, are non-conforming loans. This means they don't satisfy Fannie Mae or Freddie Mac's requirements for being bought.

Requirement	FHA Loan	Conventional Loan
Minimum Credit Score	580+500-579*	620+
Down Payment	3.5%10%*	3-20%
Max DTI Ratio	Up to 50%	Up to 45%

* For credit scores 500-579, a 10% down payment is required.

Making Your Decision

When deciding between an FHA loan and a conventional loan, it's important to consider your financial situation, long-term goals, and specific circumstances. An FHA loan might be better if you have a lower credit score or limited funds for a down payment, while a conventional loan might save you money in the long run if you have excellent credit and can make a larger down payment.

Ready to explore your options with a mortgage professional?

Start Your Pre-Approval

How to Apply for an FHA Loan

Applying for an FHA loan with SRK CAPITAL is a straightforward process designed to make home ownership accessible and stress-free. Here's a quick step-by-step guide.

Gather Your Financial Documents

Prepare important paperwork, including:

•Proof of income (pay stubs, tax returns, W-2s)
•Credit history and current debts
•Bank statements and investment records

Check Your Eligibility

Review FHA loan requirements, like:

•Lowest credit score can be 580 for a 3.5% down payment
•Steady employment or income history
•Debt-to-income ratio under 43%

Our team at SRK CAPITAL can help figure out if you meet these criteria.

Get Pre-Approved

Pre-approval helps you understand your budget and shows sellers you're a serious buyer. Send in your financial documents, and we'll assess how much you can borrow.

Find Your New Home

With your pre-approval in hand, start house hunting with confidence. FHA loans can be used for single-family homes, condos, or even multi-unit properties (up to 4 units).

Get Your Loan Approved

Once you find your new home, we'll guide you through completing the FHA loan. This includes:

•Getting your loan submitted to underwriting for loan approval
•Scheduling an FHA appraisal to confirm the home meets FHA standards

Close on Your Home

After approval, the final step is closing. Sign the necessary paperwork, pay any remaining costs, and get the keys to your new home.

Start Your FHA Application

Commonly Asked Questions

Still unsure if these loans are right for you? Here are the answers to some of the most commonly asked questions about FHA loans to help you make an informed decision.

An FHA loan can be the right choice for you if you're a first-time home buyer. Or if you have had trouble getting a loan due to your financial history. But it's always important to weigh the pros and cons of any loan choice before you fully commit to one. Make sure you're aware of all costs linked to these loans and that you have the ability to pay them.

FHA loans are particularly beneficial if:

•You have a credit score between 500-679 (580+ for the lowest down payment)
•You have limited funds available for a down payment
•You have a higher debt-to-income ratio than conventional loans allow
•You've experienced credit challenges in the past

However, consider that FHA loans require both upfront and annual mortgage insurance premiums, which increase your monthly payments. Working with a mortgage professional at SRK CAPITAL can help you determine if an FHA loan aligns with your specific financial situation and homeownership goals.

The Bottom Line

FHA loans are great for those who have lower credit scores. Or if you want a lower down payment, an FHA loan can be a good choice for you. FHA loans offer a path to homeownership for many Americans who might otherwise struggle to qualify for conventional financing.

If you're ready to start your home buying journey, get in touch with SRK CAPITAL today. We can help you on your journey to home ownership. Our team of experienced mortgage professionals will guide you through the entire process, from determining if an FHA loan is right for you to closing on your new home.

Start Your FHA Loan Journey