The Federal Housing Administration (FHA) aims to improve the housing market by insuring home loans made by approved lenders. By backing these home loans, both buyers and lenders benefit. Homebuyers are able to receive great rates and qualify with less than ideal credit while lenders are protected from borrower default. The Illinois FHA offers a number of different loan programs including options for purchases, refinances, financing special renovation projects, and even reverse mortgages. e-Finance Mortgage LLC offers some of the lowest rates on FHA loans throughout Illinois.
Illinois FHA loans are quite popular among first-time homebuyers due to their low down payment and credit score requirements. A first-time homebuyer could potentially qualify for an FHA loan with a credit score of 580 a down payment of only 3.5%. If an applicant does not have the cash available to make the minimum down payment, family members are even able to offer it as a gift.
Cash-out refinance and streamline refinance options are available for homeowners who currently hold an Chicago, Illinois FHA loan. To help protect borrowers, streamline refinancing is only available if the borrower saves money through the refinance. If a buyer is interested in taking on a rehabilitation project, the FHA 203k loan allows a borrower to combine the purchase of a home and the cost of renovations and repairs into a single mortgage.
Chicago, Illinois FHA Loan Requirements
- Credit Score – A minimum credit score of 580 is needed to qualify and be eligible for the minimum down payment requirement. Those with a score between 500 and 579 may still be able to qualify but a down payment of 10% may be required.
- Debt-to-Income Requirements – A debt-to-income (DTI) ratio of 43% or less is needed. A DTI ratio of up to 50% may be approved in special cases.
- Down Payment – 3.5% of the purchase price is the minimum down payment available. As noted above, a higher down payment may be needed depending on a borrower’s credit score.
- Property Requirements – All properties must meet certain safety, security, and soundness (structural integrity) requirements.
Maximum loan limits vary by county and can range from $271,000 up to $636,500 in high-cost areas in Illinois.
The Illinois FHA is able to protect lenders and offer such low down payment and credit requirements because of mortgage insurance. With every FHA loan, there are two mortgage insurance premiums (MIP) that a borrower must pay. The first is an up-front premium of 1.75% of the purchase price that is automatically added to your total mortgage amount by the FHA. The second premium is paid monthly as part of your mortgage payment. This premium will fall between .45% and 1.05% of your annual mortgage balance and based on factors such as the total loan amount, your loan-to-value (LTV) ratio, and the length of your mortgage.
Whether you are looking to purchase your very first home in Illinois, or are a current homeowner interested in refinancing an FHA loan, at e-Finance Mortgage LLC, we offer great rates and terms on all types of FHA loans. Contact us today for more information on Chicago, Illinois FHA loan or to begin the pre-qualification process!