The FHA loan program in Pennsylvania is administered by the Department of Housing and Urban Development (HUD) and provides an opportunity for those with less than perfect credit or smaller down payments to enjoy the benefits of homeownership. Here are a few of the critical things you need to know about qualifying for an FHA loan in Pennsylvania.

First, the down payment is only 3.5% of the purchase price of the home or its appraised value. Your down payment can also include funds provided by family or friends as a gift, but there may be added paperwork that you need to provide as part of the application process. Additionally, once the seller accepts your offer, they can also pay as much as 6% of the purchase price in closing costs, although this is not required by the FHA loan program. You can also use this program to refinance your home, thus benefiting from the current historically low interest rates. The FHA interest rates are typically lower because of the backing of the federal government, which helps to lower the risk for lenders.

Since these mortgages are backed by the federal government, you will have to pay a PMI (Private Mortgage Insurance), which will continue until your mortgage is below 80% of the appraised value of your home. Once you reach that point, then you can apply to have the PMI removed by refinancing your home through a conventional mortgage. The monthly cost of the PMI will be determined by the size of your down payment and the length of the mortgage. It can become more expensive if your credit score is less than 680. Additionally, an FHA loan in Pennsylvania will require an upfront mortgage insurance payment as part of your closing costs.

While you can use this FHA loan program in Pennsylvania with a credit score of 580, the better your credit score, the better your interest rate. If you have blemishes on your credit report, it is important that you be prepared to document them for your lender. You should also have any errors corrected by the credit reporting agencies before starting the mortgage application process to make sure your credit score is at its best.

There are maximum loan limits under the FHA loan program in Pennsylvania, but these vary by county and state. Therefore, you must check with your lender to determine what the maximum amount is for your county. These maximum limits do change from year to year, reflecting the changes in home values throughout the country.

Along with understanding the maximum loan limits, down payment requirements, and the importance of your credit score, it is also critical to understand your debt-to-income ratio (DTI). HUD has set limits regarding how high your DTI can be, although your lender might require it to be less, depending on their underwriting. Typically, however, your DTI cannot be higher than 43%.

Our team can walk you through the application process and determine if you qualify for an FHA loan in Pennsylvania. We can let you know what type of mortgage you are eligible for, thus assisting you to find the financing for your next home.