FHA loans are the easiest type of financing to qualify for.

If you’ve been thinking about buying a home, you’ve probably wondered about how you’d pay for it. If you’re like many homebuyers, you’ll likely need financing. So, which type of loan is the easiest to qualify for?

Whether you’re a first-time buyer or have purchased homes several times before, the answer is the same: The easiest one to qualify for is an FHA loan. These loans are insured by the government, but that doesn’t mean they’re backing you as the buyer. Instead, they’re backing the lender, so the lender is willing to take on more risk to lend buyers money. This allows people with low credit scores or little savings to be able to purchase a home.

The minimum credit score you can have is 500. If you’re in the range of 500 to 579, you will need to provide a 10% down payment; for anything above, you only need to put down 3.5%. However, lender guidelines can differ and require higher credit scores—these are known as lender overlays. The trick is to find a lender with the least amount of these overlays.

“You’ll want to build your credit score to later refinance to a conventional loan.”

Let’s say you have a 580+ credit score and want to buy a home, but you can’t afford the 3.5% down payment. You can still buy a home if you have a 401(k), as the FHA loan allows you to borrow money from it. You can also borrow money from family members to put toward your down payment.

However, this all comes with a catch. The FHA loan isn’t the best in the long run because it comes with two types of mortgage insurance. First, there’s a 1.75% upfront mortgage fee wrapped into the FHA loan. On top of this, there’s a 0.85% mortgage insurance premium fee that’s part of your monthly mortgage, which stays for the life of the loan unless you put down 10%. So, you’ll want to build your credit score to later refinance to a conventional loan.

Regardless of which type of loan you choose, we’re here to help you throughout the entire home buying process. Feel free to reach out to us with any questions you may have about our market. We look forward to hearing from you soon.