What Is an FHA Loan?

An FHA loan is a home loan that is backed by the Federal Housing Administration (FHA) and is designed to make it easier for individuals with lower credit scores or the inability to make a large down payment to purchase a home. FHA loans are part of the U.S. Department of Housing and Urban Development (HUD), and they are particularly popular for first-time home buyers. FHA loans for first-time buyers offer a route to homeownership for those who may not have enough in their savings account for a big down payment.

FHA loans are a great alternative to conventional home loans and can offer unique features and special characteristics across every state. Wisconsin home buyers should consider applying for the FHA loan in Wisconsin after evaluating their financial situation and homeownership goals.

How Do FHA Loans Work in Wisconsin?

FHA loans in Wisconsin help make the dream of homeownership a reality for many individuals. Borrowing limits are set every year by the HUD for each county in Wisconsin.

In the Twin Cities metro area, including the counties of Pierce and St. Croix, the 2024 FHA loan limits are as follows:

  • $515,200 for a single-family home
  • $659,550 for two-unit homes
  • $797,250 for three-unit homes
  • $990,800 for four-unit homes

In the remaining counties of Wisconsin, the FHA loan limits are set as the following amounts:

  • $498,257 for a single-family home
  • $637,950 for two-units
  • $771,125 for three-units
  • $958,350 for four-units

These limits are based on the conforming loan limits, or the maximum loan amount that meets specific borrowing guidelines set by the Federal Housing Finance Agency (FHFA). When market prices increase, so do the limits for conforming and FHA loans.

To keep up with the housing market and get your finances in order in preparation for your own home buying journey, download the Griffin Gold app. The app’s easy-to-use tools and features allow users to view mortgage interest rates based on their credit score and optimize finances for a personalized guide to economic stability.

Benefits of FHA Loans in WI

There are a multitude of benefits for FHA loans in WI, including the ability to buy a home with as little as a 3.5% down payment and the qualifying credit criteria. FHA Loans in WI are less strict when it comes to qualifying than conventional home loans. Wisconsin FHA Loans allows home buyers who have lower credit scores or lack extensive credit history to still buy a home.

These benefits make FHA Loans in WI popular for not only first-time home buyers, but for low to moderate income buyers or buyers with limited savings. Wisconsin FHA loans are an attractive option for individuals with non-traditional employment situations, such as self-employed borrowers, or others who are looking to downsize or change living situations.

Another type of FHA loan, the FHA 203(k) loan, offers benefits for purchasing homes that need renovations or repairs. This can serve as a great option for home buyers who want to purchase a fixer-upper. 

FHA Loan Requirements in Wisconsin

While the Wisconsin FHA loans are finalized by private lenders, the FHA sets qualification guidelines for lenders to follow. Key FHA loan requirements in Wisconsin include the following:

  • Credit score of at least 500 for a 10% down payment or 580 for a 3.5% down payment.
  • At least two years’ employment history, evidenced by pay stubs and tax returns.
  • A debt-to-income ratio (DTI) below 43%. This can vary by lender and some may allow for a higher DTI ratio, which represents total monthly debt payments divided by total monthly income.
  • Property must be inspected by the FHA to meet specific safety and security requirements.
  • Property must be the borrower’s primary residence.
  • Monthly mortgage payments should not exceed 31% of the borrower’s monthly income.
  • Two years should have passed since the borrower’s last bankruptcy filing.

Apply for an FHA Loan in Wisconsin

Prospective home buyers should consider applying for an FHA loan in Wisconsin if they have lower credit scores and cannot make a large down payment. This government-backed home financing option provides flexible requirements to make owning a home a reality for many individuals in Wisconsin.

As a leading FHA lender in Wisconsin, Griffin Funding is proud to offer FHA loans with competitive rates and terms. Reach out today to get more information about Wisconsin FHA loans and consult with one of our loan specialists about the best home financing options for you. Apply now.

Frequently Asked Questions: FHA Loan in Wisconsin

Is it hard to get an FHA loan in Wisconsin?

Wisconsin FHA loans are known for more flexible qualification requirements compared to conventional home loans. While it is not inherently hard to get an FHA loan in Wisconsin, eligibility depends on specific financial situations, credit history, and the property.

As long as prospective home buyers meet the key FHA loan requirements in Wisconsin, securing an FHA loan should not be difficult. As an experienced FHA lender, we can help you through each step of the process to ensure everything goes as smoothly as possible. 

What are the downsides of FHA loans?

While FHA loans offer many benefits to home buyers, there are potential downsides that borrowers should consider before applying for an FHA loan in Wisconsin. Consider the possible disadvantages to FHA loans:

  • Mortgage insurance premium (MIP): FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% of the loan amount, plus a monthly MIP of around 0.15% to 0.75%, which can significantly increase the cost of the loan
  • Restrictions imposed by FHA loan limits: FHA loan limits may not be sufficient for borrowers looking to buy a home in higher-priced areas
  • Can only be used for a primary residence: Since an FHA loan can only be used to purchase a primary residence, you won’t be able to use this type of financing to buy a vacation home or investment property. 

It is important to weigh these disadvantages against the benefits of FHA loans in Wisconsin. An FHA loan can be a great option for those with lower credit scores or a smaller down payment. However, they are not the best option for everyone.

What are alternatives to FHA loans in Wisconsin?

Home buyers have many alternatives to FHA loans in Wisconsin. The choice of the right mortgage option depends on the borrower’s financial situation and homeownership goals. Prospective buyers can consider the following alternatives to an FHA loan in Wisconsin:

  • Conventional loans: These loans are not government-backed and typically require high credit scores and larger down payments
  • VA loans: For military veterans and active service duty members, consider applying for VA loans, another government-backed mortgage program. While FHA loans are available to a broader audience and require a low down-payment, VA loans are exclusively for service members and veterans and allow for a 0% down payment. Make sure to compare FHA vs. VA loans if you qualify for both programs. 
  • USDA loans: The U.S. Department of Agriculture offers loans with no down payment requirement and competitive interest rates to individuals who choose to purchase homes in designated rural and suburban areas.