30-year FHA mortgage rates

First, the FHA determines your eligibility to apply for an FHA loan. Then, after meeting the FHA criteria to apply, you’ll also need to meet the credit criteria of the approved lender, like U.S. Bank. These credit requirements vary by lender but usually include things like credit score and down payment amount. Our experienced mortgage loan officers can assist you with your application and answer any questions you have.

There are many FHA loan benefits and considerations you should keep in mind when evaluating your loan options.

• Low down payments: Depending upon your credit score, your down payment may be as low as 3.5% of the loan amount. Also, you may be eligible for programs that help with the down payment.
  
• Less stringent down payment rules: 100% of the down payment on an FHA loan can be gifted from a relative, friend, charity or your employer or workers’ union.
• Lower credit requirements: Credit requirements (for example, below average credit scores) are usually lower than those of conventional mortgages.
• Loan relief: If you experience a financial hardship, you may be eligible for loan relief.
• No prepayment penalty: You can repay your loan before the end of the term without any penalties.
• Assumable mortgage: If you wish to sell your home, the buyer may be able to “assume” or take over your FHA mortgage.

Credit requirements for an FHA loan vary by lender. At U.S. Bank, with a credit score of 640 or higher, you can apply for an FHA mortgage with a down payment of 3.5% of the loan amount. Talk with a U.S. Bank mortgage loan officer to learn more about qualifying for an FHA loan.

FHA loans are popular with first-time homebuyers, but being a first-time homebuyer is not required for eligibility. Below is a summary of the requirements, but exceptions may apply.

As an FHA borrower:

• You must maintain mortgage insurance for a minimum of 11 years.
• Your total monthly debts must be no higher than 50% of your gross monthly income. Your total monthly debts include all monthly payments from your credit report and the new proposed housing expense.
• You must show proof of steady employment or have worked for the same employer for the past two years.
• You must have a loan amount below the FHA mortgage loan amount limit. This limit caries by state, county and type of property.
• You must not have declared bankruptcy within the past two years.
• You must not have been in foreclosure within the past three years.

The property must:

• Be your primary residence
• Be a single-family home, a one- to four-unit building or an FHA approved condominium, manufactured home or mobile home
• Not be an investment property
• Be appraised by an FHA-approved appraiser
• Be in good condition. The FHA requires the seller to make any needed repairs before closing and have a final inspection showing that they were made.

All FHA loans must have mortgage insurance. This is regardless of the borrower's credit score and down payment. The FHA uses these funds to cover the costs of defaults.

FHA mortgage insurance is usually more expensive than the private mortgage insurance (PMI) required on a conventional loan. Plus, you must maintain the FHA loan insurance for a minimum of 11 years. By contrast, for applicable conventional loans, you must maintain private mortgage insurance (PMI) only if your down payment is below 20% of the loan amount or until your home equity reaches 20%.

There are two types of FHA mortgage insurance:

• Upfront mortgage insurance premium (UFMIP): This is a one-time upfront charge of 1.75% of your loan amount. You may pay it in full at closing or add it to your loan balance.
• Mortgage Insurance Premium (MIP): This is an annual insurance premium that is required to be paid monthly. Your lender will incorporate it into your monthly mortgage payment. Amounts for this insurance range from 0.80% to 1.05% of the loan balance on a 30-year FHA.

Talk with a U.S. Bank mortgage loan officer to learn more about FHA mortgage insurance.

There are important differences between an FHA loan and a conventional loan. Which one is better for you depends upon your financial situation. Consider the following:

• An FHA loan may be your best and only option if you don’t meet the credit qualifications of a conventional loan. Though a conventional mortgage is a better option if your credit score is above 740 and you can afford a 20% down payment. Then you wouldn’t need to pay for the expensive mortgage insurance (both UFMIP and MIP) required for FHA loans. However, mortgage insurance may still apply to conventional loans when the down payment is less than 20%.
• If you can only make a small down payment, your credit score will dictate which loan is best for you. The cost of PMI on a conventional loan goes down as your credit score goes up. While the cost of FHA mortgage insurance is not determined by your credit score.
• A conventional loan may be your only option if the property does not meet FHA requirements.

An experienced U.S. Bank mortgage loan officer can help you determine the best option for you.