Last Updated on June 29, 2023 by Luke Feldbrugge
An FHA loan for EMS professionals is an excellent home loan option if who have lower credit, or a lower amount of cash available for a down payment, but still wish to purchase a new home. As a certified emergency medical first responder, belonging to and being part of your community is not only something you want, but sometimes required by your employer. FHA loans for EMS professionals is a great option to assist in making that happen.
What is an FHA Loan?
FHA stands for Federal Housing Administration. An FHA home loan is a loan insured by the Federal Housing Administration and given by an approved lender. In 1934, the FHA was created to revamp the housing industry after the Great Depression. This organization continues to help many Americans own a home, and could do the same for you. Borrowers can get up to 96.5% of their total home value in a mortgage loan, and only need to pay a 3.5% down payment.
These loans are designed for low to moderate-income earners who also have low credit scores and are generally looking for mortgages with a lower minimum down payment.
Pros and Cons of FHA Loans for EMS
Advantages of FHA Loans
EMS professionals around the country can get the following advantages with FHA home loans:
- Smaller Down Payment – FHA home loans require a smaller down payment compared to conventional home loans. Borrowers only pay 3.5%-10% of their total home loan as their down payment (depending on credit score).
- Flexible Qualification Guidelines – The criteria to be approved for a FHA loan are not as strict as conventional loans, and most EMT, Paramedic, and other EMS professionals can qualify. The main requirements with FHA is a good work and credit history.
- Available with Lower Credit Scores – FHA offers loans to people who have a low credit score and cannot get a loan from conventional lenders.
- Assumable – FHA loans are assumable. This means if you want to buy a house from someone who has not finished paying their loan, you can take over their payments instead of getting a new FHA loan.
Disadvantages of FHA Loans
FHA loans for EMS professionals seem like a great option, but there are a few things to note about FHA loans:
- Fees: There is now an Upfront Funding Fee of 1.75% of the total financed amount paid when you close on the loan. You can either pay for this in full at closing, or you are able to roll this amount into your monthly mortgage payment.
- Mortgage Insurance Premiums (MIP) – All FHA loans for EMS professionals must include MIP for the life of the loan. MIP protects the mortgage lender in case you are unable to pay the loan back. This insurance is a big reason why home buyers with lower credit scores and less cash to put down for a down payment still have the ability to purchase a house.
Generally, an FHA loan will cost a home buyer more money over the term of the loan versus other home loans such as a conventional loan, VA loan or USDA loan due to the higher interest rate and MIP costs. But, it is still an affordable option to get the home you want for you and your family!
FHA Loans vs. Conventional Loans
While there are some disadvantages to a FHA Loan, there are still many advantages over conventional loans.
- People in the EMS profession looking to get an FHA loan must have a credit score of at least 580 to get a mortgage with a down payment of 3.5%. On the other hand, to get a conventional home loan, you usually must have a credit score of 640 and above.
- Down payments for conventional loans range between 3% to 20%, depending on your credit score. Down payments on FHA loans, however, are between 3.5% and 10%. Bear in mind that the lower your credit score, the higher the down payment for FHA Loans.
- FHA loans and conventional loans also differ in length of terms. FHA loans offer terms in 15 or 30 years, while you can pay a conventional loan in 10, 15, 20, or 30 years. Generally, there are no fees to pay a loan off early, however.
- Down payment assistance programs are available for FHA loans but not conventional loans.
- 100% of the down payment can be a gift when you apply for the FHA home loan, but only part of the down payment can be a gift with a conventional home loan. You will need to provide documentation of the gift to your lender.
How to Qualify for a FHA Home Loan
To qualify for an FHA home loan, you need to meet the following requirements:
Have Verifiable Income
To qualify for an FHA home loan, you must have a verifiable income, meaning tax returns, W2’s and paystubs to confirm where you work and what you earn. Your lender will need to verify that you have been working for at least the last two years, although it does not need to be for the same employer. If you have been a EMS professional at two different employers, that is ok. However, you may not qualify for the loan if you worked as a teacher in the same 2 year period.
Be Able to Afford Payments
You must be able to pay your home loan and other debts you may have. The general rule is that your mortgage should not be more than 35% of your total wages before taxes, and your total debt (including car loans and student loans) should not be not more than 48% of your total earnings. If that cannot work with your income, you’ll need to reduce debts, save more income, and budget before buying a home. You can also use a payment calculator to help you understand how all the financial parts will make up your mortgage payment.
Save for Down Payment
Before you get the loan, you will need to save at least 3.5% of the value of your home for the down payment. If your credit score is less than 580, you will most likely need to pay up to 10% of the home value as your down payment. There are also many other costs at closing that you will need to prepare for financially.
Establish Credit History
Your lender will have to check your credit history. If you do not pay your credit cards, student loans, or other debts regularly and on time, you are unlikely to get a loan. Make sure that all your bills are paid on time to ensure that your loan is approved. The minimum FICO credit score to get an FHA home loan is 580, but bear in mind that your lender might require a higher credit score. If you have a low credit score, ensure that you check that your preferred lender accepts that score. If you do not know your credit score, you can use online resources to look it up.
Keep in Mind Home Price
FHA loans have strict guidelines on the amount you can borrow with the loan. The home price range for an FHA approved loan will vary county by county, but FHA loan limits range from $356,362 to $822,375. You can purchase a home for more than the allowed amount in your area, but you will need to make up the difference, most likely in cash.
The house you are taking a loan out for also has to meet strict health and safety standards. This is to ensure that the house will not become condemned and possibly force you to default on your loan. You will need to do an inspection on your potential house to show to your mortgage lender that the house is not in danger of any hazards.
EMS Professionals Can Offset Some FHA Loan Costs
Homes for Heroes mortgage specialists work with FHA home loans for EMS and first responder professionals, and provide significant savings on their lending fees. In addition, you will receive Hero Rewards savings valued at 0.7% of the home purchase price after you close on your new home when you use a Homes for Heroes real estate specialist to purchase your home. That’s how EMS professionals like you can save an average of $3,000 on the purchase of your new home.
To get started, sign up today and Homes for Heroes will connect you with a member of the team. That person will contact you to answer your questions. When you’re ready, they will connect you with their local real estate and mortgage specialists in your area to guide you through the process.