If you are in the NC market for a new home but have had some bad credit, FHA loans in NC are available. Particularly, FHA loans are for NC homebuyers with a credit score of no lower than 620 who wish to purchase homes that need renovation. Unfortunately, the banks aren’t always as excited about buying and fixing up a home as homebuyers are, and getting a private loan will likely cost you an arm and a leg.
Who Qualifies for FHA Loans in NC?
FHA is a government program that issues loans for people who might have trouble getting a loan otherwise. Since the mortgage gets backed by the federal government, lenders tend to feel comfortable lending to all applicants, even people like you who have had problems with their credit and make a humble income. The best part? You may be only required to put 3.5% down! What’s the catch?
Actually, there is no catch. However, there are some points you will want to take note of. For example:
- You need to be able to prove that you’ve had steady employment for the last three years. Education counts.
- You must have a credit score of no less than 520.
- You must not have had a bankruptcy within the past two years.
- You must be able to show twelve months of on-time bill payments.
- The cost of repairs or renovation must not be less than $5k.
- The cost of repairs or renovation must not exceed $295k.
- You’ll also need private mortgage insurance.
Getting Private Mortgage Insurance
In exchange for the low down payment and credit leniency, you’ll have to pay two insurance premiums – up front and yearly. The upfront MIP is 1.75% of the total amount of the loan, and the yearly premium is 0.85%. How much do you need to borrow?
If you were going to take a loan for $200k, your upfront MIP would cost you $3,500 ($200,000 x 1.75%). Your monthly premium would be an extra $141.67 ($200,000 x 0.85%/12 months). It might seem like a lot at first, but it shouldn’t bother you too much. The benefits of putting a small down payment to get the home your family needs usually outweighs the disadvantages of paying the FHA MIP.
An FHA Loan Might be the Only Option for Your Family
For many homebuyers in NC, FHA loans are the only way to move forward. Hopefully, things will go well for you at work and your loan will feel more affordable. Look at this way; once you build up the equity and bring up your credit score in a couple of years, you can probably refinance into something more conventional. Just be sure to use a mortgage calculator to know how refinancing would work out for you.
In the meantime, contact AmeriSouth. We can go over the loan options you have, explain the pros and cons, and help you select the product for your FHA loans in NC.