Buying a home in Georgia is expensive, even if you can find a relatively affordable property. In addition to the upfront costs of a new mortgage, down payment, and closing costs, you will inherit new monthly expenses to own and occupy the house.
Many homebuyers look at the numbers when purchasing a house and decide it is not worth the risk. If they get far enough to look into conventional home loans, the requirements for eligibility may be intimidating.
Fortunately, conventional mortgages are not the only type of home loan available to Georgia homebuyers. A Federal Housing Administration (FHA) loan is a viable alternative that is more accessible to borrowers who cannot meet the requirements of conventional loans.
This article will review everything you need to know about an FHA loan, including an FHA streamline refinance, mortgage insurance premium, and the FHA loan requirements to qualify for an FHA loan.
What is an FHA Loan?
The federal government created the FHA loan program to incentivize more people to purchase homes. Homeowners help stimulate local economies, but many prospective buyers are deterred from making these investments because of the costs or requirements of a conventional mortgage.
To allay this concern, the government decided to insure certain loans so that mortgage lenders could relax some of their standards for borrower qualification. In Georgia, you have a better chance of being eligible for an FHA home loan than a conventional loan if you have lower income, more debt, or a less-than-perfect credit score.
Since the FHA insures these products, Georgia FHA loan benefits include looser requirements to make them accessible to more borrowers. FHA borrowers can also take advantage of smaller down payments, competitive interest rates, and fewer barriers to entry. FHA loan limits make it possible to finally own a home.
Key Eligibility Requirements
Although obtaining an FHA loan in Georgia is more accessible for many borrowers, there are still standards for each lender to determine whether or not you qualify. Despite the government’s backing, the mortgage lender must still assess your ability to pay back the FHA loan on time before approving your mortgage loan application.
Credit Scores
A borrower’s credit score reflects their history of paying back debts. These debts may include other home loans, car loans, credit cards, etc. Your credit score will grow if you have a long credit history of making on-time payments. Typically, the minimum credit score for a conventional mortgage is 620, though it could be higher for some lenders.
The FHA loan program has more accessible credit score requirements, typically allowing borrowers with scores of at least 580 to apply for loans. Acquiring an FHA loan with even lower credit scores is possible, but your other finances must be solid.
Income Limits
The good news about Georgia FHA loans is there are no income limits for qualification. That means a borrower can earn no set minimum or maximum income to be disqualified from an FHA loan.
However, this does not mean everyone can apply for an FHA loan in Georgia. The lender must still verify that you can afford an FHA mortgage, which requires enough money to have a debt-to-income ratio of 50% or less.
Employment History
Stable income is required for a Georgia FHA loan approval. Part of the mortgage underwriting process includes verifying the borrower’s employment status. Your income must be consistent enough to keep your DTI ratio low and afford the monthly payments.
You can calculate your debt-to-income ratio by adding all your monthly debt payments and dividing that by your gross monthly income. Multiply the result by 100 to get a percentage.
Down Payment Assistance Options
While an FHA loan in Georgia makes homeownership more affordable, significant upfront costs can keep many buyers out of the market. Numerous down payment and closing cost assistance programs exist throughout the state to reduce these upfront expenses and make homeownership more attractive.
The Georgia Dream Homeownership Program is one of the most popular options for down payment assistance. First-time homebuyers can benefit from this program, which offers down payment, closing cost assistance, and first-time homebuyer education.
In Gwinnett County, which covers much of the Atlanta area, borrowers can apply for the Homestretch Down Payment Assistance Program. This program provides funds as a deferred loan to cover the down payment on a home. The loan is deferred for five years, accrues no interest, and can eventually be forgiven with no payments if the borrower occupies the house for the whole period.
Atlanta Housing also provides down payment assistance of up to $20,000 for first-time homebuyers in the city. Specific individuals, such as those in public safety, healthcare, public education, active military, or veterans, are eligible for up to $25,000. The assistance is a 0% forgivable loan that can be dismissed once the borrower has lived in the house for at least ten years.
Depending on the county, assistance programs for various down payment and closing costs are available throughout the state. Fulton, Cobb, and DeKalb each have programs available to most first-time homebuyers and previous homeowners to reduce the upfront costs of purchasing a home. Most of these programs can be used in conjunction with FHA loans.
Property Requirements for FHA Loans
While FHA loans have no income limits, there are standards for the properties that can be purchased with these products. This ensures lenders cannot give out FHA loans to every borrower for every house, and FHA loan limits are used to buy livable property.
First, Georgia FHA loan limits establish the maximum price a home can be and still be financed with an FHA mortgage. The government establishes a loan limit yearly, but the maximum loan amount can vary based on location. The standard loan amount limit throughout the state is $498,257 for a single-family home. The limit increases slightly for each additional unit. Higher loan limits in more competitive markets like Atlanta could reach $649,750.
Properties financed with FHA loans must also meet specific standards for their condition. An FHA loan will require an FHA appraisal by a professional assessor. This person will ensure the house’s structural components, electrical, plumbing, HVAC, fixtures, utilities, and other elements are up to standard. Otherwise, the home may not be eligible for an FHA loan in Georgia. Additionally, the house must become the borrower’s primary residence.
Required Documentation
A thorough underwriting process evaluates your borrower credentials when applying for a Georgia FHA loan. This includes a deep dive into your financial background and employment status to ensure you meet FHA loan requirements. Providing accurate and complete documentation to the lender will be key for most FHA loans.
Some documents typically required when applying for FHA loans include government IDs, bank statements, income verification, pay stubs, gift funds, tax returns, W-2s, utility bills, assumable loans, and profit loss statements. Keep these documents ready and up-to-date so you can provide them if the loan officer requests additional information during the underwriting stage.
It’s crucial to be honest during this stage. Tell them if you can’t afford a large down payment or have federal debt obligations. Provide proof of address, even if the new house will be your primary residence. Professionals must know everything possible to determine if you meet FHA loan requirements, assess your loan limit, and can make mortgage payments.
FHA loans also have additional requirements, like mortgage insurance. Borrowers are required to carry mortgage insurance for the duration of the loan. Having money set aside for an upfront mortgage insurance premium is crucial. Ask your lender if you must carry a homeowner’s insurance policy, and ensure you know your down payment requirement.
Common Myths and Misconceptions
There are several common myths associated with the Georgia FHA loan program. First, many people think you can only apply for FHA loans if you do not qualify for a conventional mortgage. This is not true, as there are no limits on the maximum income or a higher credit score that would disqualify the borrower.
Another myth is that an FHA loan is only for borrowers with a poor credit history. However, even buyers with excellent credit scores can apply for this program. FHA guidelines are loose to help more people qualify for an FHA loan, but that doesn’t mean other people won’t qualify for an FHA mortgage.
Some borrowers assume that FHA mortgages are only for first-time buyers but are also available to previous homeowners. An FHA insured mortgage is open to anyone who meets the criteria. However, FHA lenders may want to know why you want to purchase a new primary residence.
A common myth is that these loans are for borrowers who need a cheap house. While the highest loan limit may be less than a jumbo loan, the loans provide ample money for a nice house. FHA loans are for people who may have a lower credit score according to credit reports or need a lower down payment option.
Lastly, a common misconception is that applying for an FHA loan means you are not eligible for down payment assistance programs. Many down payment assistance programs work hand in hand with multiple types of loans, including FHA products.
The Bottom Line
The FHA program is a more affordable alternative to conventional loans. With a lower minimum credit score, easier down payment requirements, competitive interest rates, and maximum loan amounts, borrowers who struggle to qualify for conventional financing can still achieve their dreams of homeownership.
If you meet the minimum credit score, have a manageable debt-to-income ratio, and verify steady employment and income, you can secure an FHA loan for a home in Georgia. The loan amount is often enough to cover a new home for your family, and programs are available to help with down payments. At TrueWay Mortgage, we can provide personalized guidance as you navigate the world of FHA loans. Our team can walk you through the mortgage process if you have questions about the state’s highest loan limits, the annual mortgage insurance premium (MIP), or Georgia FHA loan requirements. Call TrueWay Mortgage today at 404-962-0032 to learn more.
