Purchasing a home can be the beginning of a fantastic life as a young professional, newly married couple, family with kids, or retired couple. No matter your situation, understanding of loan requirements in Louisiana can help you secure the capital to afford a house without going bankrupt.
What Is an FHA Loan?
An FHA loan is a resource that helps future homebuyers, and borrowers purchase a home in Louisiana without worrying about their current credit score. Since the Federal Housing Administration created FHA loans in 1934, they have helped millions of U.S. residents purchase homes without going into debt.
The U.S. The Department of Housing and Urban Development regulates the usage of FHA loans, making them a government project. Since the government regulates these loans, they are less likely to be affected by financial concerns, providing borrowers with more safeguarding.
For first-time home buyers who want to borrow money to purchase a property without a risky financial move, the best option is to use an FHA loan approved by a bank or lender-approved agency.
What Are the FHA Loan Requirements in Louisiana?
Before you apply for an FHA loan for a property, there are a few Louisiana FHA loan requirements to keep in mind to see if you will qualify:
- Credit Score >580: Certain lenders might accept scores lower than 580 in certain circumstances or require the borrower to pay a larger down payment.
- 3.5-10% down payment: The higher your credit score is, the lower your down payment needs to be.
- 2+ years of employment: Borrowers must have steady, reliable, verifiable, and stable income for at least 2+ years before the application in the form of W-2s, self-employment income, tax returns, or pay slips.
- Mortgage insurance: Borrowers must be able to pay the mortgage insurance premium, which is determined based on the loan amount. The minimum MIP is 1.75% for any FHA loan upfront.
- Home inspection standards: The property the borrower is looking to purchase must pass an FHA appraisal.
- Residential property: The FHA loan must be directly used for residential properties; commercial, vacation, or business properties do not count.
- Debt-to-income ratio <57%: The DTI ratio must be less than 57%, which includes student debt, federal debt, credit cards, or unpaid bills.
Louisiana FHA Loan Benefits
Now that you know the minimum qualifications to apply for an FHA loan in Louisiana, it can be helpful to understand the benefits of this type of loan. Why should you apply for an FHA loan here vs. other states or other types of bank loans?
- Low down payments: Depending on credit score, homeowners can have low down payments as minimal as 3.5%.
- Assistance programs: The Louisiana Housing Corporation offers assistance programs for homebuyers.
- MRB Home and Assisted Programs: Helps buyers meet downpayment and closing costs, ranging between 5-9% based on the loan amount
- Resilience Soft Second Program: Offers upwards of $55,000 for the down payment and $5,000 for closing costs
- LHC Soft Second Program: Offers $30,000 for the down payment and $5,000 for closing costs.
- Financial gifts from others can be used to finance the down payment
- FHA loans can have a DTI ratio of as high as 57%, compared to conventional loans of up to 45%
- No monthly income requirement is required
- Various types of loans are available
- The seller can contribute to 6% of the closing costs
- Assumable loans: The borrower can take over a pre-existing mortgage
- Variety of acceptable properties
Types of FHA Loans
Before you apply for an FHA Loan in Louisiana, it can be helpful to break down the different types of loans to see which one best suits your needs.
Home Equity Conversion Mortgage
The Home Equity Conversion Mortgage is a reverse mortgage tool that helps older homeowners keep their property title while converting their equity into cash. This allows the homeowner to receive consistent income via a fixed monthly amount to receive ‘income continually’.
FHA 203k Improvement Loan
Another type of FHA loan that is a smart choice for those interested in flipping homes or renovating their property is the FHA 203k Improvement Loan. For homeowners who want to add more equity to their property, this could help fund their renovations, repairs, and fixes.
FHA Energy Efficient Mortgage
This type of mortgage allows homeowners to refurbish their homes to make them more environmentally friendly and energy efficient. This incentive is great for future homeowners who want to update their house using new technologies, such as solar energy or energy-saving equipment.
Good Neighbor Next Door
This type of FHA program allows professionals to use a loan to buy a home in a specialized area designated for regrowth and revitalization. The allowable professionals include emergency personnel, teachers, and firefighters. The Good Neighbor Next Door Program gives eligible homebuyers 50% off the listing price and an extremely low down payment.
Section 245a Loan
The 245a loan allows low-to-moderate-income families to make small monthly mortgage payments that gradually increase over time. The home buyer and borrower can select the amount of the payment increase, personalizing the home loan to their projected increase in income.
How to Apply for an FHA Loan
Understanding the prerequisites of what qualifies you for an FHA loan is critical to understanding if you should apply for this type of federal loan. Although each loan is different, there are a few basic steps to remember when it comes to borrowing from federal banks.
- Set your budget — knowing how much you can spend is crucial to choosing a lender
- Contact your mortgage lender
- Collect the appropriate documents — Speak with your mortgage lender to gather the correct documents, including proof of income, tax returns, W-2s, self-employment income, 1099’s, and Social Security information.
- Gather information regarding current debts — student debt, credit cards, mortgages, etc.
- Estimate your mortgage costs using the Louisiana Mortgage Calculator
Learn About FHA Loan Requirements in Louisiana With Our Help
Do you need help securing an FHA loan for your future property? If so, get in touch with Home Helpers Properties today to learn more about Louisiana loan requirements. Even if you have past credit issues or you are a first-time home buyer, we can provide you with the tools and expertise needed to begin your road to home ownership.