If you dream of owning your own home, the difficulty of saving the down payment and qualifying for a mortgage loan may seem utterly impossible. Fortunately, the Federal Housing Authority (FHA) offers a variety of programs designed to put home ownership within reach for those with minimal savings and less-than-perfect credit. For those who qualify, an FHA loan can help overcome some of the obstacles standing between you and owning a home.

What Is an FHA Mortgage Loan?

To minimize the risk of lending to borrowers with low down payments or low credit scores, the FHA offers insurance to financial institutions willing to offer mortgage loans to these groups. Instead of the 20% down payment required by most private lenders, buyers participating in the FHA program may be able to pay as little as 3.5%.

Even those with credit scores between 500 and 579 may be eligible to purchase a home with a 10% down payment. However, the lower your credit score, the higher your interest rate will be, and all participants will be required to pay mortgage insurance, in addition to their monthly mortgage payments.

Who Qualifies for an FHA Loan?

In addition to the down payment and minimum credit score, buyers applying for an FHA loan must also have a steady employment history or demonstrate that they’ve worked for their current employer for at least two years. You’ll also have to get the property appraised and prove that the mortgage payment, taxes, insurance, and HOA fees represent no more than 31% of your gross income. Finally, an FHA loan can only be used for a primary residence, not a second home or investment property.

For more than 100 years, Magnolia Bank has provided personal service and a broad portfolio of banking services to clients throughout Elizabethtown, Hodgenville, and Magnolia, KY. Whether you’re looking for a trusted lender to handle your daily banking needs or applying for a mortgage loan, you can rely on their friendly experts to give you the individual attention these important matters deserve. Visit their website now to find your nearest location, call (270) 358-3183 with any questions, or follow their Facebook for more news and updates.