In Pennsylvania, the demand for homes is higher than ever. If you’re looking for affordable mortgage options, FHA financing may be a good fit for you. An FHA loan comes with several perks, including lower down payment requirements, and this financing option may help you into an affordable home.
From what homes qualify to the Pennsylvania FHA requirements, we’ve rounded up everything you need to know about buying an FHA home. Let’s jump in and see if FHA financing is the right option for you.
What is an FHA Financing?
FHA financing is a mortgage that is insured by the Federal Housing Association (FHA). The FHA doesn’t actually loan money, and instead, it backs the loan you receive from a private bank or lender. The FHA also doesn’t pay the bank for your loan.
The FHA offers protection on loans where buyers may not meet traditional criteria for a loan. For example, you will likely have higher down payment requirements and stricter loan criteria on a conventional loan. The FHA loan program gives more protection and the ability to offer more loans to homeowners.
What are the Different Types of FHA Financing in Pennsylvania?
While you may think the only option for an FHA loan in Pennsylvania is a fixed-rate loan, there are several other choices. A fixed-rate loan is the most common FHA loan issued, and this loan features a set interest rate over the entire course of the mortgage.
With a fixed-rate loan, your payments will stay almost the same for the entire time you have the loan. The only variation will come from insurance or property taxes yearly, and the difference is minimal. Most fixed-rate mortgages are for 15 or 30 years.
An adjustable-rate mortgage is one where the interest rate changes throughout your loan period. You will likely see the same rate for the first three to five years, and then it will adjust from there. If you don’t plan on staying in your home for a long period of time, an adjustable-rate mortgage is a great option.
With an adjustable-rate mortgage, your interest rate will go up and down with the market. This means a more significant fluctuation in your mortgage payments. Speak with your mortgage lender about additional loan options within the FHA program.
What Homes Qualify for FHA Financing in Pennsylvania?
It’s important to note that not all homes will qualify for an FHA loan in Pennsylvania. You’ll want to be sure that the homes you’re viewing will qualify for this program if you intend to use FHA financing. These qualifications are mainly put in place to make sure you’re buying a secure and safe home.
In addition to the home appraisal that we would use for a traditional loan, another assessment is done to make sure the home is a sound investment. FHA regulations require that the home is safe in addition to appraising at or above fair market value.
With a traditional loan, we would always run an appraisal to make sure the home you’re buying is worth what you’re paying. In addition to these criteria, we’re also looking at the FHA’s safety standards and making sure the property reflects them.
A home receiving FHA financing must have a working HVAC system, good water pressure, hot water, working sinks, toilets, and showers, as well as access to a basement or crawl space. In addition, you can not exceed the loan limits set in each county in Pennsylvania and surrounding states for a single-family home.This limit will change every year, and it will be different for single-family and multi-family homes.
Pennsylvania FHA Loan Requirements
For any loan, your credit score will play a significant role in what loan terms you receive. The higher your credit score, the better. However, with an FHA loan, the credit requirements are looser than you’d find with a traditional loan.
Being able to get a mortgage with a lower credit score is great for many reasons. To start, if you have less-than-perfect credit, you may have had limited loan options outside of FHA financing. The FHA home-loan program also makes home buying possible for young adults who don’t have a lot of credit.
In Pennsylvania, you only need a credit score of 580 to qualify for an FHA loan, and you also only need a 3.5% down payment. With a conventional loan, you’ll typically see higher down payments requirements.
Home Buying Tips
Whether you’re applying for an FHA loan or a conventional mortgage, there are certain things you can do before you apply. To start, run your credit report yourself, and see where your score is and see if there is anything you can do to bump up your score.
Next, start saving for a down payment. Even if you only put 3.5% down, you may find having extra cash helpful for closing costs, moving expenses, and home updates. This is also a great time to make a budget. Go through your expenses and see what you’re paying on a monthly basis.
After assessing your income compared to your expenses, you’ll have a pretty good idea of what monthly mortgage payment you can afford. If it’s not as high as you’d like, go through your budget and see where you can trim. You may be surprised to find you’re still paying for yoga classes you haven’t been to in years.
Maybe you don’t need a car after your move, or you find you can cancel some music and streaming services you aren’t using. Anything you can do to boost your monthly savings will help you buy a home.
Get Your Mortgage Application Started
If you’re ready to learn more about your FHA loan or mortgage options, you’ve come to the right place. We have FHA financing, conventional loans, and more to help make home-buying a reality. Let us help you with an FHA or alternative option and get you into your new home.
For more information about our loan options, fill out the contact form here. You’ll be put in touch with a local Pennsylvania mortgage professional.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with each mortgage transaction phase. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.