Home Appraisal vs. Home Inspection: A Buyer’s Guide to Home Buying

Jennifer Hernandez • December 31, 2023

Are you buying a home and unsure of the difference between a home appraisal and home inspection? During the home buying process, It's important to understand the difference between the two . This guide will clarify their definitions so you can make informed decisions for your dream home.


Home inspections generally happen after the purchase contract is signed with a seller, and are ordered at the buyer’s discretion. Inspections are not mandatory but highly recommended. There are different types of inspections that will be covered in the information below. In addition, how to look for an inspector.


If you are obtaining any kind of loan for your purchase, the property appraisal will be ordered by the lender. This report ensures the property's value matches the value of the contract, in order to confirm the loan to value. The information below will cover the process as well as the basics you need to know.

The Home Inspection Explained

Imagine you've found your dream home, signed the contract, and can't wait to move in. But before you start packing, there's an essential step - the home inspection. This usually happens after you've signed the contract, but did you know that the timing can vary by state? Home inspections aren't mandatory, but they are highly recommended. They play a vital role in ensuring that your dream home doesn't turn into a nightmare.


Finding a reliable home inspector is key. Recommendations from trusted sources such as your realtor, or friends that own homes already, can lead you to someone who will assess not just the cosmetics but also the structural integrity, safety, and functionality of crucial systems like plumbing, electrical, and HVAC. Depending on the types and quantity of inspections you need, the cost can vary. Generally, you should expect several hundred dollars at a minimum, and will depend on how many types of inspections you obtain. These can include termite inspections, foundation assessments, air quality checks, and more. While it might add to the expense, these inspections are incredibly comprehensive and can help you make well-informed decisions.


Most contracts, depending on the state in which you live, will have an area indicating a period of time in which you have to perform these inspections in order to decide whether or not you will continue with the contract. Your realtor will play a crucial role in helping you understand these types of deadlines before negotiating a contract, so you know timelines that are expected to have inspections complete.


Once the inspection report is received, usually being same day or within 24 hours of inspection, you will need to review items on the report. This is where realtors, again, can play a crucial role in helping understand the report, and which items you might need to pay the most attention to. They can help you obtain costs of repairs, if any, so you may then know a budget required once you move in.


It is common that buyers ask sellers for repair allowances in the form of closing cost credits or price reductions during this period of time. This step is not mandatory, but common, depending on the severity of inspections. Remember that a contract is a negotiation, and the seller is not required to agree to repairs , unless required by your lender after the appraisal is received.


Let’s explore this in more detail in the next section.

Navigating Post-Inspection Negotiations

Once the home inspection is done, you could find yourself facing a few different situations. One possibility is that you uncover issues that require some repairs or maybe a tweak in the purchase price. This is when your realtor steps in as your superhero. They've got the negotiating cape on, and they'll talk to the seller based on what the inspection found. The name of the game here is clear communication and being upfront about everything.

Now, when it comes to requesting repairs or making deals, there are some smart strategies to consider. The aim is to reach a solution that makes everyone happy – you and the seller. It's like finding that sweet spot where both parties feel good about how to proceed. After all, this isn't just any investment; it's your new home we're talking about, and you want to make sure it's in tip-top shape.

So, remember, after the inspection, it's not just about what issues you've found but how you handle them. With the right approach and your realtor by your side, you can navigate post-inspection negotiations smoothly, ensuring that your investment in your new home is a smart and satisfying one.


Now that the inspection period is over, this brings us to another important step in your guide to the process. The property appraisal.

The Home Appraisal

Now, let's turn our attention to home appraisals, which are particularly relevant when you're financing your home through a mortgage. If you're paying with cash, this step might not be necessary, but for most mortgage transactions, it's a vital part of the process.


The appraisal is ordered usually 7-10 days into the process, after any option period or inspection period as we mentioned above.  It is very common and should be expected that the lender will ask you to pre pay this fee before ordering. For this reason, you want to be sure the inspection period has passed, in order to be sure you are moving forward with the property.


Here's how it works: lenders want to make sure that the value of the property matches the amount of the loan you're asking for. To keep things fair, the lender independently selects an appraiser. They follow certain guidelines, like the
Home Valuation Code of Conduct (HVCC), which is a federally mandated protocol, to ensure that appraisers remain unbiased. This impartiality is crucial because it prevents any outside influence on property valuations, which could lead to inaccurate assessments.


Accuracy is essential to the success of the process.   Inaccurate appraisals can result in financial losses for both buyers and lenders. To get things right, appraisers take their time to evaluate the property correctly. Typically, this process takes about five to seven days in a balanced market. However, market conditions can influence these timelines.


During the appraisal, the focus is on the property's amenities, size, location, and condition in comparison with a minimum of 3 comparables in the immediate area.  The appraiser doesn't pay much attention to the operational status of appliances; their main concern is the overall condition of the property. This ensures that your home's value aligns with your mortgage, protecting both you and the lender. To be more direct, the lender wants to be sure that the loan to value, which is the percentage of loan to the price , or value of the property, is aligned. This will be explained further below.

Inside the Appraisal Process

Let's take a closer look at the appraisal process. When the appraiser visits the property, they conduct a visual inspection. This means they walk through the property, taking measurements and keeping an eye out for any signs of wear and tear or safety concerns. They're essentially assessing the overall condition of the property without getting into the nitty-gritty details of appliances or conducting complex tests.


Ethical considerations play a significant role in the appraisal process. Appraisers take their job seriously, ensuring fairness and accuracy. They carefully select comparable properties that have recently sold in the area, making sure these properties are truly similar to the one they're appraising. By doing this, they can provide a reliable estimate of the property's value. They also rely on market data, including recent sales and trends, to gauge the property's worth.


Now, why is all of this so crucial? Well, the value determined by the appraiser directly affects the loan amount you can secure. Lenders use the lower of the property's purchase price or the appraised value to determine your loan amount. So, if the appraisal value comes in lower than the purchase price, it can impact your financing options and potentially require adjustments in your home buying plans.

Understanding Loan-to-Value Ratios

Loan-to-value (LTV) ratios are a big deal when you're buying a home. They tell you and the lender what percentage of the property's value is covered by your mortgage. Appraisals are the key factor in confirming these ratios. Now, here's the twist – if the appraised value comes in lower than what you're paying for the property, it can have an impact on your mortgage terms.


Let’s say you are putting 5% down on a home price of $500,000. That means that your loan-to-value, or LTV, is 95%. This equates to a loan balance for $500,000 times 95%, which equals $475,000. The lender will be looking for the appraisal to be received at the same amount as the purchase price or higher, which is $500,000.


Let’s say that the appraisal comes in lower, at $490,000. The lender will then adjust their LTV calculation to 95% of the lower amount, which is the $490,000. This means instead of loaning you $475,000, they will now loan you $465,500. 

The lender is fine with this new arrangement, as long as you have the extra funds to pay the difference between the new, lower, loan amount, and the purchase price. This would mean you have to pay more money out of pocket than anticipated. Another option is that you have your realtor return to the seller, and negotiate different terms. This is a possibility, but not mandatory, that the seller accepts. Another reason to rely on a realtor to assist in your home purchase, as issues that arise such as this require skill and experience to negotiate.  In summary , LTV ratios are a vital part of the home buying equation. Appraisals ensure accuracy , and play a crucial role in the home buying process.


To put it all in perspective, home inspections are like your trusty detectives, diving into the nooks and crannies of a property to uncover any hidden secrets about a home’s condition. . They provide you with valuable insights, allowing you to budget for potential repairs or renovations and make an informed decision about whether the property is the right fit for you.


On the flip side, home appraisals serve as the safety net in this intricate process. They ensure that the property's assessed value aligns with the purchase price that has been negotiated. This is crucial because it safeguards both you and the lender from making financial commitments that aren't in sync with the property's actual market value.


As we wrap up this guide, we genuinely hope you've gained a deeper understanding of these pivotal aspects of the home buying journey. Buying a home is a significant milestone, and having the right knowledge at your fingertips empowers you to make sound decisions.


If you are looking for a trusted lender in the homebuying process, feel free to reach out to my team at hdzteampreapproval@legacymutual.com . Legacy Mutual Mortgage is an equal opportunity lender. NMLS#514497

Visual concept of down payment assistance with a stack of $100 bills, a house icon, and a notepad
By Jennifer Hernandez April 14, 2025
Down payment assistance programs (DPAs) sound like a dream come true—free money to help you buy a home! But before you get too excited, there are hidden costs and crucial details you need to be aware of. Let’s uncover the real impact of DPAs so you can decide if they’re the right fit for you. What Are Down Payment Assistance Programs? Down Payment Assistance Programs, or DPAs, are designed to help homebuyers, particularly those with limited income, afford a home. While many of these programs are for first-time buyers, some cater to repeat buyers as well. Here are the key factors to consider: Income Limits: Most DPAs have income restrictions based on your area’s average median income. Credit Score Requirements: Your credit score will need to meet a minimum threshold. Geographic Restrictions: While some programs are available statewide, others are limited to specific locations. Types of Down Payment Assistance Grants – Free money that doesn’t need to be repaid. These are typically reserved for first-time buyers. Forgivable Loans – A second mortgage that is forgiven after you live in the home for a set period (commonly 3, 10, or even 20 years, depending on the program). Deferred Payment Loans – A second lien with no required payments until you sell or refinance your home. This must be repaid when you pay off your first mortgage. Sounds great, right? Well, let’s dive into the hidden costs and fine print you need to be aware of.  The Hidden Costs of Down Payment Assistance 1. Higher Interest Rates Most DPAs come with a higher interest rate compared to conventional financing. This means you could be paying thousands more in interest over the life of your loan. While some programs offer competitive rates, qualifying can be more difficult. 2. Increased Closing Costs In addition to a higher interest rate, many DPAs come with additional fees, such as: State Administration Fees: These can range from $500 to $600. Origination Fees: Some lenders charge a percentage of the loan to access the program. Before committing to a DPA, compare a loan estimate with and without assistance to see the true cost side by side. 3. Restrictions on Occupancy Many DPAs require you to live in the home as your primary residence for a set period. If you decide to rent it out, you could be required to pay back the assistance in full. 4. Income and Location Restrictions Most programs have income caps based on your area’s median income. If your income exceeds the limit, you won’t qualify. Some programs also require you to buy in specific areas. 5. Recapture Tax (Resale Requirements) Some programs include a recapture tax , meaning if you sell your home for a profit, the program can claim a portion of that profit as repayment for the assistance. This can be a significant financial setback if you weren’t expecting it.
Illustration of a no-down-payment mortgage concept, with a house and a crossed-out money bag symbol
By Jennifer Hernandez April 8, 2025
Dreaming of owning a home but haven’t saved up for a down payment? You’re not alone—and good news: there are options for you! In this post, we’ll break down four powerful ways to buy a home with little or no money down —plus, a few key mistakes to avoid that could cost you thousands. These are real strategies we use with buyers every single month. 1. USDA Loans – For Rural Buyers The USDA loan program, which is backed by the United States Department of Agriculture , offers 0% down financing for eligible properties and borrowers. The catch? There are income and geographic restrictions . Good for : Rural or suburban buyers outside city limits Down payment : $0 Bonus : Lower mortgage insurance than FHA  Check if a property qualifies for USDA Watch this video : Understanding USDA Loans with Jen 2. VA Loans – For Veterans and Their Families If you’re a veteran or the surviving spouse of a veteran, the VA loan offers a $0 down path to homeownership—with no mortgage insurance and loans available up to $2 million ! Good for : Active military, veterans, or qualified spouses Down payment : $0 Bonus : Flexible credit guidelines and competitive rates Watch this video : How VA Loans Work 3. Down Payment Assistance (DPA) If USDA or VA don’t fit your situation, down payment assistance programs (DPAs) might be your best option. These programs are provided at the state, county, or city level , and they can cover some or all of your down payment and/or closing costs. Good for : First-time and repeat buyers with limited savings Down payment : Partial or full assistance Bonus : Can sometimes be combined with seller credits Texas buyers, check out: 🔗 My First Texas Home Program 🔗 Texa s State Affordable Housing Corporation (TSAHC) Video breakdown : Down Payment Assistance Explained 4. Gift Funds – From Family or Close Friends Did you know you can receive money as a gift to help with your down payment? That’s right. FHA, VA, USDA, and Conventional loans all allow gift funds on primary residence purchases. But before you make a huge cash deposit, make sure you talk with your lender about how to document the gift. Good for : Buyers with supportive family Down payment : Fully or partially covered by gifts Note : Must be properly documented with a gift letter and proof of transfer Learn more : How to Use Gift Funds
Smiling woman using a credit card and smartphone, highlighting the importance of credit education.
By Jennifer Hernandez March 31, 2025
Your credit score is the key to unlocking your financial future. Understanding how it’s calculated can help you make better financial decisions and avoid costly mistakes. Many people find their credit score to be a mystery—sometimes it drops even when they make payments on time! If you've ever been frustrated by fluctuations in your score, this guide will break down the five key components of your credit score so you can take control and boost it effectively. Why Your Credit Score Matters Your credit score is a three-digit number that reflects your financial responsibility to creditors. It affects everything from securing a mortgage or auto loan to getting approved for credit cards and even determining your interest rates. The better your score, the more favorable your loan terms— lower interest rates, smaller deposits, and better financial opportunities . In fact, 90% of lenders use FICO scores as their primary credit evaluation tool ( source ). But how exactly is your FICO score calculated? Let’s break it down. The 5 Components of Your Credit Score 1. Payment History (35%) – Never Pay Late! Your payment history is the most important factor in your credit score. It includes: On-time vs. late payments (payments that are 30+ days late are reported to credit bureaus) Collections and charge-offs Bankruptcies or foreclosures 🔹 Pro Tip : Always pay at least the minimum payment by the due date. Setting up auto-pay can help prevent accidental late payments. If you’re struggling, reach out to creditors to discuss payment plans before you fall behind. 📌 More on improving your payment history: How Late Payments Affect Your Credit Score 2. Credit Utilization (35%) – Keep Your Balances Low Your credit utilization ratio refers to the percentage of available credit you’re using. High utilization can hurt your score, even if you pay your balance in full each month! 🔹 Best Practice : Keep your credit card balances between 10-30% of your credit limit. For example, if you have a $5,000 limit, don’t carry a balance higher than $1,500 at any time. 🔹 Secret Tip : Your balance is reported to the credit bureaus on your statement closing date , NOT when you make a payment. If you pay your credit card bill before the statement closing date, you can lower the reported balance and improve your utilization ratio. 📌 More on credit utilization: Mastering Your Credit Score 3. Length of Credit History (15%) – The Longer, the Better Credit bureaus consider how long your accounts have been open. Older accounts demonstrate stability and reliability . 🔹 Best Practice : Avoid closing old credit accounts, even if you don’t use them often. Keeping them open helps maintain your average account age . 📌 More on the importance of credit history: How are Credit Scores Made? 4. New Credit & Inquiries (10%) – Be Careful with Hard Pulls Every time you apply for credit, a hard inquiry is recorded on your report, which can slightly lower your score. Applying for multiple credit accounts in a short time signals to lenders that you may be in financial trouble. 🔹 Best Practice : Keep new credit applications to a minimum and only apply when necessary. 🔹 Good to Know : Soft inquiries (like checking your credit score on your own) do not affect your credit score! 📌 More on credit inquiries: Does a Hard Enquiry Damage My Credit Score? 5. Credit Mix (10%) – Variety Matters  Having a healthy mix of credit types boosts your score. Lenders like to see that you can manage different types of credit responsibly . A strong credit mix includes: Installment loans (e.g., mortgages, auto loans, student loans) Revolving credit (e.g., credit cards, home equity lines of credit) 🔹 Best Practice : If you only have one type of credit, consider adding another responsibly (e.g., opening a credit card if you only have loans). 📌 More on credit mix: How Your Credit Mix Affects Your Score
Person filling out a form with a focus on understanding hard inquiries on a credit report.
By Jennifer Hernandez March 24, 2025
Does a Hard Inquiry on Your Credit Really Hurt Your Score? If you're planning to buy a home in Texas, you may be wondering: Does a hard inquiry on your credit really damage your score, and how will it affect your chances of mortgage approval? Let's break down what a hard inquiry is, how it impacts your credit, and strategies to minimize its effect so you can confidently move forward with your home purchase. What is a Hard Inquiry? A hard inquiry occurs when a lender checks your credit report to assess your creditworthiness for a loan, credit card, auto loan, or mortgage. Unlike soft inquiries (which happen when you check your own credit or when a lender pre-qualifies you without a formal application), hard inquiries are recorded on your credit report and may impact your credit score. Inquiries remain on your credit report for up to two years , but the good news is that FICO scoring models (used by 90% of lenders) only consider them for one year. This means that while the inquiry stays visible on your report, its impact on your score diminishes after 12 months. How Hard Inquiries Affect Your Mortgage Approval  A hard inquiry alone is unlikely to prevent you from getting pre-approved for a mortgage. However, here’s what you need to know: FICO Treats Multiple Mortgage Inquiries as One: If multiple mortgage lenders pull your credit within a 30-day window , it only counts as one inquiry for scoring purposes. This allows you to shop for the best mortgage rates without penalty. Other Inquiries Can Hurt Your Score: While mortgage inquiries are grouped together, applying for credit cards, auto loans, or personal loans during the same time frame can lower your score. Impact Depends on Your Existing Credit Score: If your credit is already strong (e.g., 700+ score ), a hard inquiry may have a minimal effect—think of it as a small “peck” on a steel building. However, if your credit is already struggling, an additional inquiry could have a more noticeable impact. 👉 For a deeper dive into credit scores and mortgages, check out Loan with Jen’s guide on mortgage pre-approvals .
Concerned man reviewing a collections notice on his credit report while on the phone.
By Jennifer Hernandez March 20, 2025
Did you know that paying off a collection won’t help your credit score unless it gets deleted ? That’s right! Collections don’t automatically disappear from your credit report, even if you’ve settled the debt. If you’re planning to buy a house or improve your credit, removing collections can be a game-changer. In this guide, I’ll walk you through six proven steps to delete collections from your credit report forever , plus a bonus hack that might speed up the process. Follow these steps carefully, and you could see your credit score improve significantly! Why Collections Hurt Your Credit Score A single collection—whether it’s $10 or $5,000 —can drop your credit score by 100 points or more overnight. Your credit score affects more than just home loans. It impacts: Your ability to qualify for a mortgage Your interest rates on car loans and credit cards The deposit amount for utilities like electricity and internet Having a collection on your report can cost you thousands of dollars in extra interest over time. That’s why it’s crucial to remove them the right way . Step 1: Get Your Full Credit Report Before you start, you need to know exactly which collections are reporting and to which credit bureaus . Where to pull your credit report: AnnualCreditReport.com (Free once per year) MyFICO.com (Paid but gives accurate FICO scores, which mortgage lenders use) Pro Tip: Make sure you get reports from all three bureaus ( Experian, TransUnion, and Equifax ) since not all creditors report to every bureau. Step 2: Identify the Collections & Calculate Your Offer Once you have your report, write down all open collections (not charge-offs). Keep track of: Collection company name Amount owed Contact phone number Now, add up the total amount owed and calculate 50% of that number . This will help you negotiate later. For example: If your collections total $2,000 , set aside $1,000 for settlements. Having funds ready before negotiating gives you leverage to settle immediately when the time comes. Step 3: Research the Collection Agency Not all collection agencies have the same policies. Look up the collection company online to see if they offer Pay-for-Delete (PFD) agreements. This means they will remove the collection once you pay . If the company is PFD-friendly, mark them as a priority! Step 4: Call the Collection Agency & Negotiate This is where your sweet voice comes in! Be polite, professional, and never argue . Follow these steps: Call the collection agency directly (no emails or texts!). Ask for a settlement : Start by offering 20-25% of the balance. Negotiate : If they counteroffer, work towards 50% or less . Ask for Pay-for-Delete : Say, "If I settle today, will you delete this from all three bureaus?" Get it in writing : Before paying, request a written agreement confirming deletion . If they refuse Pay-for-Delete , do not pay . Keep calling back until you get an agent who will agree. Step 5: Make Your Payment & Track It  Once you receive a written confirmation , pay the settlement amount using a traceable method like: Credit/debit card Online payment portal (if available) Check or money order (with proof of payment) After paying, follow up with the collection agency to confirm when they will notify the credit bureaus. Most agencies report once per month , so expect deletion to take 30-90 days .
Businessman pushing credit score meter from poor to excellent.
By Jennifer Hernandez March 3, 2025
This information could save you thousands of dollars. Not all credit scores are FICO scores, and to complicate things even further, there are over three dozen versions of FICO ! If you’re planning to buy a home soon and are concerned about your credit score, keep reading—I’m breaking down the real facts. No fluff, just the essential details you need to know. The Credit Score Surprise As a mortgage loan officer with nearly three decades of experience , I’ve seen it all. Every week, I ask new clients what they think their credit score is. Without fail, the number they provide is different from the actual score I pull. Sometimes it’s just a few points off, but I’ve also seen differences of 100 points or more ! Why does this happen? Credit scores are highly individualized, and not all scores are calculated the same way. Here’s the good news—I’ve been pulling credit reports since mortgage companies began using FICO scores. I’ve learned how to navigate this complicated world, and I’m here to share what you need to know. What Is a FICO Score?
Checking FICO score on a smartphone, showing credit factors like payment history and usage.
By Jennifer Hernandez February 27, 2025
If you’re planning to buy a home in the next 12 months, understanding your credit score is essential. Not all lenders use the same credit scoring system, and the score you see from your credit card company may differ significantly from what mortgage lenders use. About 90% of lenders rely on FICO scores , but what exactly is FICO, and why is it so important? In this post, we’ll take a journey through the history of FICO and credit reporting, explain why not all credit scores are created equal, and give you practical tips to improve your credit score for home buying success. What Is FICO, and How Did It Start? To understand FICO, we need to take a step back into history. FICO (Fair Isaac Corporation) wasn’t always the gold standard for credit scoring. Its roots go back to 1956 as a data analytics company that specialized in building algorithms for various industries. But credit reporting actually started before FICO got involved, it began much earlier—back in the 1800s . The Birth of Business Credit Reporting In 1841 , a company called The Mercantile Agency began collecting and recording data on businesses, providing valuable information to creditors. This company later rebranded as Dun & Bradstreet , which remains a major player in business credit reporting today. While businesses were being tracked and scored, there was no system in place for consumer credit. That changed in the early 1900s . The Evolution of Consumer Credit Reporting In Atlanta, The Retail Credit Company (RCC) emerged in the early 1900s, collecting extensive data on individual consumers. Unfortunately, they went too far—gathering private personal information, including political affiliations and even racial and sexual details. The U.S. government stepped in to regulate this overreach by enacting the Fair Credit Reporting Act (FCRA) in 1970 , which established rules on how consumer credit information could be collected and shared. Feeling the heat from the new regulations, RCC rebranded as Equifax , one of the three major credit bureaus we recognize today, along with TransUnion and Experian . By the late 1980s , these agencies were struggling to make sense of the growing mountain of credit data. They needed a standardized system to interpret creditworthiness—so they partnered with FICO . How FICO Became the Standard for Credit Scoring In 1989 , FICO introduced its credit scoring system, which quickly became the industry standard for evaluating credit risk. FICO’s algorithm turned complex credit data into a simple three-digit score, making it easier for lenders to assess borrowers' trustworthiness when it came to paying back debt. Today, FICO is used by about 90% of lenders , although there are dozens of FICO models , each tailored to different types of lending (e.g., auto loans, credit cards, and mortgages). Why Your FICO Score May Vary  If you’ve ever checked your credit score online and then applied for a mortgage, you might have noticed a significant difference between the two numbers. That’s because not all credit scores are created equal. There are more than three dozen versions of FICO , and each one serves a different purpose. For example: FICO Auto Score is used by auto lenders to determine your car loan eligibility. FICO Bankcard Score is used by credit card companies. FICO Mortgage Score is used specifically by mortgage lenders. Each version uses a slightly different algorithm to weigh factors like payment history, credit utilization, and length of credit history. Mortgage lenders typically use the most recent version of FICO, which can result in a lower score compared to what you see on consumer credit apps. Getting the new FICO scoring into a company’s system is costly, so when you are getting a free credit report, you are most certainly not getting the most up-to-date and accurate credit score. Companies just can’t afford to give the score away for free.
Person pulling a needle on a credit score gauge toward the green zone, symbolizing improving credit
By Jennifer Hernandez February 17, 2025
If you’re planning to buy a home, one of the most important questions on your mind is probably: What credit score do I need to qualify for a mortgage? I’m here to save you hours of research and give you the real facts that matter most. We’ll cover the minimum credit score requirements for various loan types, from conventional to FHA, VA, USDA, and portfolio loans. Plus, read to the end for a bonus tip on how to boost your credit score by 40 to 50 points—fast! Understanding Credit Scores for Mortgages  Not all credit scores are created equal. While you may see one score when checking your credit card or car loan, the FICO score used for mortgages could be different. There are over three dozen FICO models, but 90% of lenders rely on one specific version for mortgages. 💡 Pro Tip: The best way to know your mortgage FICO score is to check with a licensed mortgage lender. Minimum Credit Score Requirements by Loan Type
FHA home loan concept with cash and a calculator in the background
By Jennifer Hernandez February 12, 2025
Are you exploring loan options and wondering if an FHA loan might be right for you? If you need leniency on credit, higher debt-to-income ratios, or have faced past credit challenges like bankruptcy or foreclosure, an FHA loan could be the key to achieving your homeownership dreams. Let’s unpack the details of FHA loans, including the latest 2025 updates, their unique benefits, and factors to consider. What Is an FHA Loan? FHA stands for the Federal Housing Administration, a government-backed entity that has been making homeownership more accessible since 1934. During its inception, only 1 in 10 people were homeowners. Today, that number has risen to 6 in 10, thanks in part to initiatives like FHA loans. FHA loans are designed to help borrowers with less-than-perfect credit or other financial challenges qualify for home financing. Every year, FHA adjusts its loan limits based on home value trends, providing a flexible and accessible option for buyers nationwide. FHA Loan Limits for 2025  In 2025, FHA loan limits have increased by approximately 5-6%, reflecting rising home prices across the country. For a one-unit property, the baseline limit is $524,225. However, limits can go much higher in high-cost areas like California, New York, and New Jersey. In these regions, FHA loans can reach up to $1,209,000 for a one-unit property. If you’re curious about the FHA loan limit in your county, use this handy lookup tool . FHA also allows financing for two, three, or four-unit properties with higher limits. This makes it a versatile choice for those interested in multi-family homes.
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