What Is an FHA Loan?

An FHA loan in Montana is a specialized type of financing tailored for individuals who have modest credit scores or are faced with the challenge of assembling a substantial down payment. Established in 1934, the Federal Housing Administration (FHA), under the umbrella of the U.S. Department of Housing and Urban Development (HUD), was created to enhance housing standards and introduce a low income home loan that simplifies the path to homeownership for Americans.

In the vast landscapes of Montana, the FHA loan program enjoys popularity as a distinct choice when compared to traditional mortgage options due to its lenient down payment requirements and more adaptable credit standards. Montana FHA loans are particularly favored by first-time home buyers and those seeking a path to homeownership without extensive savings.

Through the FHA loan program in Montana, borrowers can secure their dream homes with a minimal 3.5% down payment and below-average credit scores. This is made possible by the fact that FHA loans are issued by private lenders but backed by the federal government. Since the federal government agrees to pay back lenders in case a borrower defaults, private lenders are more willing to issue mortgages with very competitive rates, low down payment requirements, and beneficial terms.

FHA Loan Requirements in Montana

Montana FHA loans are made available through private lenders, who must adhere to some requirements set by the FHA. At the same time, private lenders have some flexibility to set their own requirements when it comes to FHA loans. Below are some of the key FHA loan requirements in Montana to keep in mind as you consider this type of financing: 

  • Credit score: Griffin Funding accepts credit scores as low as 550 for FHA loans.
  • Proof of income: Borrowers should typically come prepared with verification of at least two years of employment history.
  • FHA inspection and appraisal: The property must undergo an FHA inspection to ensure it meets specific safety and security standards.
  • Primary residences only: The property being financed must be designated as the borrower’s primary residence. This means that vacation homes and investment properties are not eligible for FHA financing. 
  • Acceptable DTI ratio: FHA loan applicants in Montana should ideally have a debt-to-income (DTI) ratio of 43% or less. 

Before embarking on your Montana FHA loan journey, it is important to carefully evaluate these requirements. Reach out to a Griffin Funding loan representative today to learn more about the specific requirements you have to meet to qualify for an FHA loan in Montana. 

FHA Loan Limits in Montana

Purchasing a home in the Big Sky Country can become a reality with the help of an FHA loan. However, prospective home buyers must be mindful of the FHA loan limits in Montana, which are determined annually by the HUD.

FHA loan limits in Montana are outlined for each county and are linked to conforming loan limits, signifying the maximum loan amount allowable under specific borrowing guidelines established by the Federal Housing Finance Agency (FHFA). The HUD uses the conforming loan limit to determine the highest and lowest amounts that the FHA can finance to prospective home buyers. Montana’s FHA loan limits span from 65% to 150% of the conforming loan limit.

Most counties in Montana qualify for the lowest loan limit, $498,297, for a single-family home. The loan limits in Montana increase with multi-unit homes. The following six counties have a higher FHA loan limit: Broadwater, Ravalli, Park, Missoula, Flathead, and Gallatin. Gallatin has the highest FHA loan limit in Montana, set at $754,400 for a single-unit home.

Apply for an FHA Home Loan in Montana

Prospective homeowners should explore the advantages of Montana FHA loans. An FHA loan in Montana is an excellent fit for first-time buyers, individuals with less-than-perfect credit scores, and those facing challenges when it comes to securing a substantial down payment.

Apply for an FHA home loan in Montana through Griffin Funding. Reach out to a Griffin Funding representative today to talk through options and kickstart the homeowning process. For further insights and assistance, download the Griffin Gold app to compare home financing options, manage your finances, get updates on the real estate market, and prepare for homeownership.

Frequently Asked Questions

What are the benefits of Montana FHA loans? 

An FHA loan in Montana offers potential homeowners who are concerned about their credit score or face challenges in making a substantial down payment the opportunity to achieve homeownership. Key advantages of the Montana FHA loan include:

  • Minimal down payments: Borrowers can qualify for an FHA loan in Montana with a down payment as low as 3.5%.
  • Flexible debt-to-income (DTI) ratio: Montana FHA loans boast more lenient DTI ratio requirements when compared to conventional loans, granting additional financial flexibility to borrowers.
  • Lenient credit qualifying criteria: Lenders are flexible when it comes to borrower’s credit score for FHA loans, allowing borrowers to purchase or refinance.

Do FHA loans have a salary cap? 

There is no maximum salary that disqualifies individuals from getting an FHA loan in Montana. However, the borrower must be able to prove that they can afford the loan by submitting salary and employment documentation.

Can I use the FHA loan program to refinance? 

Yes, an FHA loan can be used to pull cash out of your existing home or to lower your interest rate through the FHA Streamline refinance program.

What is the difference between an FHA loan and a conventional loan? 

There are a few key differences to be aware of when comparing FHA loans and conventional loans. Firstly, FHA loans are backed by the federal government, while conventional loans are not. Since lenders won’t be reimbursed if a borrower defaults on a conventional loan, they’re qualifying requirements are much more stringent. 

Another key difference between FHA loans and conventional loans has to do with mortgage insurance. With a conventional loan, you’ll typically be required to pay private mortgage insurance (PMI) if you make a down payment of less than 20%. However, you can apply to remove PMI once you reach 20% equity in your home. With an FHA loan, on the other hand, an upfront and annual mortgage insurance premium (MIP) is required on all loans and typically can’t be removed, regardless of how much equity you build in your home.