Any way you slice it, an FHA loan is easy as pie.

Because they’re backed by the government, FHA loans are one of the easiest types to qualify for. Embrace accepts FICO(R) Scores as low as 580 for certain purchase loans, and offers down payment options as low as 3.5%. Plus, your entire down payment, including closing costs, can be covered with gift funds. Also, your debt-to-income ratio doesn’t have to be as low as with a Conventional mortgage, and reserve funds aren’t generally required. FHA loans are ideal for first-time homebuyers or borrowers who have challenging credit.

These loans are also a great option if you’re purchasing an older home or a fixer-upper. Through the FHA 203(k) program, you can finance the cost of the upgrades through your mortgage, instead of having to pay for repairs in cash or through more expensive options like a credit card or personal loan.

Refinancing with an FHA loan is also possible. If your credit isn’t in the best shape, but you want to save a little money, the FHA Streamline Refinance program might be the way to go. If you’ve kept up with your monthly payments for at least a year, you can apply for one without having your income, employment, or credit verified.

FHA and Conventional loans are the most common mortgages in the country. Both offer benefits, but there are many differences between them and, depending on your situation, one may be preferable over the other. Understanding the requirements for each can help you figure out which loan is right for you.

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Slice of Cherry Pie

FHA

An FHA loan is administered by the Federal Housing Administration (FHA) and is easier to qualify for than a Conventional loan. With the FHA guaranteeing the loan, lenders are more willing to approve applications, but FHA loans are usually more costly.

  • Down payments as low as 3.5%
  • Single-family homes, condos, multi-unit properties, and manufactured homes
  • Mortgage insurance is required
  • Entire down payment and closing costs can sometimes be covered with gift funds
  • Extra funding available for renovations and repairs with FHA 203(k) program
  • FICO(R) Scores as low as 580 may qualify

Conventional

Conventional loans conform to Fannie Mae/Freddie Mac guidelines and are a financial agreement between the lender and the borrower. Conventional loans are not government-backed so they may be harder to qualify for than FHA loans, but they typically have lower costs.

  • May offer lower interest rates
  • No private mortgage insurance (PMI) with 20% down payment. Shorter-term PMI with less than 20% down.
  • More expensive home purchases possible
  • Available as fixed-rate and adjustable-rate mortgages
  • Require minimum credit score of 620
  • Often require 20% down payment. Some gift funds allowed.
  • May require less documentation and therefore take less time to process
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Frequently asked questions

What does it mean to be pre-approved?

Pre-approval is more involved and carries more weight than pre-qualification.  With Embrace, this process will be as simple and streamlined as possible so you can start finding your new home. We’ll calculate the specific mortgage amount for which you are approved. You'll also have a better idea of the interest rate you will be charged on the loan and, in some cases, you might be able to lock-in a specific rate. With pre-approval, you will receive a conditional commitment in writing for an exact loan amount, allowing you to look for a home at or below that price level. Obviously, this puts you at an advantage when dealing with a potential seller because it’s clear you are very close to obtaining the financing you need.
In short: no middle man. As a direct lender for Fannie Mae, Freddie Mac, and an approved issuer for Ginnie Mae, we underwrite our loans. We are not a broker or a lead reseller and we never take your call and then pass your application off to someone else. Your Embrace Home Loans Mortgage Specialist works directly with you through the entire loan process — from beginning to end. This kind of personalized service means we can truly get to know you, and provide impeccable service that perfectly fits your needs. It also means we can offer better interest rates and terms — all while keeping you completely informed with real-time, up-to-the-minute information regarding your loan. There’s simply no better way to go through the mortgage process.
FHA insured loans are mortgages that are insured by the Department of Housing and Urban Development — which means the government is essentially guaranteeing it will pay the mortgage if you cannot. FHA insured loans require a much lower down payment on a house than most other financers…usually just 3.5%. Plus, qualifying for an FHA insured loan is often easier than qualifying for a conventional mortgage — making it attractive for homebuyers and homeowners alike.
Your credit score is calculated with a mathematical formula. It uses information in your credit report and compares it to information on tens of millions of other people. The resulting number is a highly accurate prediction of how likely you are to pay your bills. People with the highest credit scores get the lowest interest rates. Your credit score considers both positive and negative information in your credit report. Late payments will lower your credit score, but establishing or re-establishing a good track record of making payments on time will raise your score. Call 800-333-3004 to speak to a Loan Officer to get more information.
Getting a home appraisal is a standard part of the mortgage process. Lenders like Embrace will give customers a loan based on the appraisal value of the property they’d like to buy or refinance. Appraisals are conducted by 3rd party companies and are not influenced by Embrace Home Loans. Home appraisals are determined by comparing recently sold, comparable homes in the same neighborhood as your home or the home you are interested in purchasing or refinancing. The appraisal company provides a report to Embrace after the appraisal is conducted.  Quite simply, when you use a home for collateral for a loan, the lender wants an appraisal report to make sure the loan will be guaranteed by the value of the property.
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30-Year Fixed-Rate Refinance Mortgage Example:
The payment on a $225,000 30-year fixed-rate cash out refinance loan at 3.250% with a 70% loan-to-value (LTV) is $979.21 with 2 points due at closing. The Annual Percentage Rate (APR) is 3.520%. This assumes a FICO score of at least 690. Payment does not include taxes and insurance premiums, which will result in a higher monthly payment. Interest rates and annual percentage rates (APRs) are based on current market rates and are subject to change without notice. Rates offered may be subject to pricing add-ons related to property type, loan amount, LTV, credit score, and other variables. Mortgage insurance may be required for LTV >80%. If mortgage insurance is required, the mortgage insurance may increase the APR and the monthly payment. Stated rate may change or not be available at the time of loan commitment or lock-in.

30-Year Fixed-Rate Purchase Mortgage Example:
The payment on a $225,000 30-year fixed-rate purchase loan at 3.125% with a 70% loan-to-value (LTV) is $963.84 with 2 points due at closing. The Annual Percentage Rate (APR) is 3.390%. This assumes a FICO score of at least 710. Payment does not include taxes and insurance premiums, which will result in a higher monthly payment. Interest rates and annual percentage rates (APRs) are based on current market rates and are subject to change without notice. Rates offered may be subject to pricing add-ons related to property type, loan amount, LTV, credit score, and other variables. Mortgage insurance may be required for LTV >80%. If mortgage insurance is required, the mortgage insurance may increase the APR and the monthly payment. Stated rate may change or not be available at the time of loan commitment or lock-in.