Who Is a Good Fit for the FHA 203(b) Loan?
The 203(b) loan program was developed with a specific subset of consumers in mind. In general, those who will benefit most from this FHA loan program:
Have lower credit scores – as low as 580. Note that those with a credit score less than 580 (from 500 to 579) must make a 10% down payment or they fail to qualify for this loan program. Those with credit scores under 500 do not qualify for the program at all.
Have less than 20% of the home’s purchase price to use as a down payment – as little as 3.5% can be used with the FHA loan. However, note that this amount varies. The lower your credit score is, the higher your down payment will need to be.
Qualify to finance up to 96.5% of the total home’s value – this is a decision the lender will make.
Are interested in purchasing a single-family home, or refinancing an existing mortgage on a single-family home (qualifying properties, only). Note that the FHA 203(b) loan can be used to invest in multifamily properties up to four units in size, but only if you intend to live in one of those units yourself.
So, in a nutshell, the ideal borrower is looking to purchase or refinance a single-family home (or qualifying multifamily property). They have good to poor credit, but their credit score is no less than 500. They have at least 3.5% of the purchase price of the home to use as a down payment, although those with lower credit scores (under 580) will need at least 10% down.
It is important to note that the FHA does not offer any loan program that allows buyers to take out a loan without any down payment. In order to find a no down payment loan, you will need to look at a VA loan (if you or a family member qualify), or go with a USDA loan instead.