Kansas continues to respond to some challenges for LGBTQ+ equality. However, some cities offer those of all lifestyles access to equal opportunity and living. Kansas City, Kansas, for example, received a perfect score from the Human Rights Campaign (HRC). The Delano District in Wichita is also making strides toward more inclusiveness.
Despite pushes to reduce diversity initiatives, many in Kansas are fighting back against these restrictions, recognizing the value of a multicultural and inclusive society. These advancements make purchasing a property in Kansas tantalizing for those who seek affordable housing, lovely weather, and quiet living.
If you’re dreaming of home ownership in Kansas, an FHA loan is worth considering. High down payments and low credit scores are some of the biggest barriers to purchasing a home today. FHA home loans overcome these common challenges and make buying your next home an easier process.
Contact Pride Lending today to learn more about how an FHA mortgage can help you buy your next home.
What Are FHA Loans?
Since its development in 1934, the Federal Housing Administration (FHA) has played a critical role in encouraging homeownership amongst marginalized groups. For example, a quarter of a million Black borrowers have become first-time homeowners over the past three years thanks to the program. The Department of Housing and Urban Development has explicitly stated that supporting underserved communities is one of its primary goals in the coming years, only building on its commitment to those who might be sidelined by the mortgage industry.
This includes LGBTQ+ people, who have benefited from HUD’s non-discrimination policies since 2012. In 2021, this commitment was reaffirmed in an executive order that directs HUD’s Office of Fair Housing and Equal Opportunity to thoroughly investigate any instances of discrimination in housing access for LGBTQ+ individuals.
These strong protections for marginalized individuals are paired with excellent mortgage benefits, making an attractive option for potential buyers.
A Federal Housing Administration loan helps make homeownership in Kansas more accessible through lower down payments and better interest rates. Because of the less stringent eligibility criteria, FHA home loans are popular among first-time homebuyers and are also a great financing option for those with less-than-perfect credit scores.
The FHA loan program is able to offer people better rates and loan terms than conventional loans because it’s backed by the government. While FHA loans themselves come from private lenders, the loans are regulated and insured by the Federal Housing Administration, a branch of the United States Department of Housing and Urban Development.
Benefits of Federal Housing Administration Loans in Kansas
Using an FHA loan to finance your Kansas home offers many benefits, including the following.
Lower Credit Score Requirements
A credit score is an important factor when purchasing a home, as it tells the lender a borrower’s likelihood to repay the loan on time. Conventional loans often have stricter credit score requirements, making FHA loans a better option for borrowers with less-than-perfect credit scores.
This is especially true for BIPOC and LGBTQ+ individuals, who have historically struggled with access to credit. For example, over a quarter of Black and Hispanic individuals are credit invisible, meaning that they have no credit history to speak of. Because FICO scores take time to build up and are partially based on the length of credit history, this can make it difficult for buyers to reach the benchmarks necessary for conventional mortgages.
LGBTQ+ individuals are twice as likely as their cishet peers to report poor or very poor scores, which can bar them from access to financing. The situation is even worse for LGBTQ+ women and people of color, who are doubly disenfranchised thanks to their multiple marginalized identities. Thankfully, the more flexible requirements for FHA loans can make it possible for these potential homeowners to secure mortgages.
Most Kansas FHA lenders require a FICO score of at least 580. Even lower credit scores, down to 500, may be eligible with a minimum of 10% down in return.
Small Down Payment Options
A down payment is an upfront investment that lenders require their clients to make toward the home purchase; FHA loans require between 3.5% and 10% upfront.
A smaller down payment requirement can make homeownership more accessible for a larger number of Kansas home buyers, particularly those who have not had opportunities to build wealth.
For example, over half of LGBTQ+ consumers have less than $5,000 in savings, and 20% have no savings at all. This is much lower than the median savings of all households, which is about $25,700. Despite the fact that BIPOC people are more likely to save responsibly every month, Black families have only 23% of the wealth of their White colleagues, and Hispanic families have only 19%. Many BIPOC people suffer from lower pay even if they work for the same employer as a White professional, making it even harder to build wealth. This makes it essential that marginalized communities have access to low-investment products.
In most cases, buyers with at least a 580 credit score will qualify for 3.5% down, whereas those with scores below 580 will need at least 10% down.
Competitive Interest Rates
Many Kansas buyers prefer FHA loans because of the competitive interest rates. Interest rates refer to the cost borrowers pay to finance a home loan and significantly impact your mortgage payments.
Those with low scores who are seeking conventional mortgages often find themselves paying very high rates to help mitigate risk, particularly marginalized individuals. In fact, Black and Hispanic people are typically charged higher interest rates than White individuals, while LGBTQ+ purchasers may have to pay 0.02% to 0.2% more in interest than their cishet peers. However, the competitive rates with these products can help reduce these disparities; lenders know they will recoup some of their losses if the borrower defaults, so they are more willing to take risks on clients.
Interest rates may vary depending on the length of the loan, whether it’s adjustable or fixed-rate, and current rates set by the Federal Reserve. Your personal financing factors also influence rates.
Flexible Underwriting Guidelines
The biggest benefit of Kansas FHA loans is the flexible underwriting guidelines. The requirements tend to be less stringent than conventional loans, making them a good option for those who may not otherwise qualify for financing. This may be part of the reason that amongst BIPOC people, denial rates are much lower for FHA loans than for conventional loan products.
While many mortgage companies will want a credit score of at least 580 and a maximum debt-to-income of 43%, flexible financing may also be available to individuals who don’t meet these exact lending requirements. This includes DTI ratios up to 57% and credit scores as low as 500.
Assistance programs help more Kansas residents achieve homeownership; these can include local, state, and nationwide programs.
Assumable Mortgages (Buyer Can Take over Existing FHA Loan)
FHA loans are assumable, which means a buyer can take over an existing loan. An assumable loan is a great choice when an existing FHA loan has a locked-in competitive interest rate.
Locking in a good interest rate now on your Kansas purchase with an assumable mortgage can also make your property more appealing to buyers when you’re ready to sell.
FHA Loan Requirements for Kansas Borrowers
While Kansas FHA loans tend to offer more financing flexibility, some eligibility requirements still must be met. Qualifying for an FHA loan in Kansas requires the following.
Minimum Credit Score
To obtain an FHA loan in Kansas, you will need at least a 500 credit score. However, many lenders request borrowers to have at least a 580 credit score. Kansas purchasers with credit scores lower than 580 will be required to come up with a higher upfront investment.
You can improve your credit by paying down debt, avoiding new debt, and establishing a solid credit history. On-time payments are especially important to your credit score.
Down Payment Amount
Almost every home loan type (except USDA loans and VA loans) requires some money down. FHA loans have lower down payment requirements than conventional home loans, usually around 3.5% for those with a score of 580 or higher or 10% down for those with scores less than 580.
If you’re interested in buying a home in Kansas but don’t have enough saved up to cover the initial costs, you may still qualify for a loan. Kansas has many assistance programs available, including the Kansas Down Payment Assistance Program or the Kansas Housing Resources Corporation First Time Homebuyer Program.
We can also help you find national programs that meet your needs, including those specially made for certain groups of homebuyers.
Additionally, FHA loans allow gifted funds to be applied to your upfront costs. This means you can accept gifted funds from family and friends if you supply a gift letter explaining that this is not a second loan.
Debt-To-Income Ratio (DTI)
FHA loans in Kansas allow a debt-to-income (DTI) ratio of up to 57%. However, most loan companies request a maximum DTI of 43%.
The debt-to-income ratio is the amount of debt you have compared to your income. You can calculate your DTI by dividing your total gross monthly income by your existing monthly debt payments—multiply this number by 100 to convert this number to a percentage. You can also input your current income and existing debt into a DTI calculator.
Property Standards
FHA guidelines also have minimum property standards for what purchases qualify for an FHA home loan. Properties eligible for an FHA loan must be safe and structurally sound. Generally, a lender doesn’t approve properties that pose safety issues or hazards. This includes properties that require extensive repairs.
These property standard requirements are enforced by ordering an appraisal during the loan approval process. All homes must undergo an extensive appraisal and inspection, which checks things like the foundation, utility, zoning, and overall structure. FHA loans can be used on single-family homes, plus condominiums, multi-family units, and manufactured homes. Additionally, FHA loans are reserved for primary residences, which means they can’t be used to fund an investment or vacation property in Kansas.
Mortgage Insurance Premiums (MIP)
Mortgage loans with less than a 20% down typically require a mortgage insurance premium (MIP). Since many buyers turn to an FHA loan because there is no large down payment requirement, most applicants will be required to pay mortgage insurance.
Mortgage insurance requires an upfront mortgage insurance premium of 1.75% at the beginning of the home loan, included in closing costs. Monthly mortgage insurance is also required for the life of the loan if you provide less than 10% upfront. Those who provide at least 10% upfront can have their MIP removed after 11 years. It’s also possible to refinance into a conventional loan once you have 20% equity, which will remove private mortgage insurance.
Kansas FHA Loan Limits
FHA sets loan limits, which are the maximum purchase price they will finance. Loan limits vary depending on current rates and the specific county within Kansas. FHA loan limits reflect the housing market, so that you can expect higher limits on cities with higher prices.
FHA loan limits in Kansas range between $498,257 and $958,350. Currently, all single-family homes in Kansas have an FHA loan limit of $498,257. Maximum loan limits are higher for multi-, tri-, and quad properties. Loan limits also change yearly based on market trends. You can check the current loan limits for the Kansas county in which you’re planning to buy by using the HUD tool.
The FHA Loan Process
Ready to apply for an FHA loan for your dream home in Kansas? Complete the FHA loan process with the following steps:
- Review the FHA Loan Requirements – Ensure you meet the FHA loan requirements. The typical borrower has a credit score of at least 580, a debt-to-income ratio of 43%, no recent bankruptcies, and proof of income. However, it may still be possible to access funding if you have a score as low as 500 and a DTI of up to 57%, though you may have to provide at least 10% down. Make sure you’re planning to purchase a primary residence and consider how you will cover the initial costs, whether that is an assistance program or gift funds.
- Contact Pride Lending – The right mortgage specialists can make your application process easier. Pride Lending is here to help walk you through the FHA loan application. During your initial loan consultation, we’ll look at your details and determine what kind of mortgage products will suit your needs.
- Submit Your Details – Submit your application through Pride Lending’s online system. You’ll need proof of ID, employment information, gross income statements, and a credit report. This will help us decide how much you can afford and issue a preapproval letter.
- Get Preapproved and Start Shopping – Our loan officers will review your documentation and, if approved, provide you with a pre-approval. A pre-approval tells realtors and sellers that you’re likely to be approved for an FHA loan. It also informs you of the amount you qualify for so you can shop based on your budget. We’ll provide this letter to your realtor, and you can start hunting for your dream Kansas home, whether that’s a single-family home or a duplex. Throughout the process, you can always reach out to us with any questions you may have about your budget.
- Submit an Offer – You and your realtor will work together to craft an offer letter for the seller that is competitive yet fair.
- Finalize Your Loan Application – At this junction, you will fill out the Uniform Residential Loan Application required for an FHA loan. This includes many of the same details as is required for your preapproval, but it will also ask for information about the property itself.
- Offer Acceptance – If your offer is accepted, you’ll sign a purchase contract that says you’re agreeing to buy the home. You and your realtor will then order an inspection to ensure the property is safe and habitable.
- Inspection – This, while not required for an FHA loan, is typically demanded by the lender; it’s also just a good idea in general, as it ensures there are no serious concerns with the property. If anything major comes up, you’ll need to decide whether you’re still willing to go through with the sale.
- Conditions – If you’re satisfied with the results of the inspection, our loan officers will help you review the contract and check that the conditions are fair for your needs.
- Begin Underwriting – Now, your application and all the details provided so far are sent over to the lender. The lender’s underwriting team will start to review your application and investigate the property as a whole to see whether it represents an acceptable risk level to their company. The underwriter may come back to ask for further details, so be sure to stay responsive. We’re also here to answer any questions you may have to help you look through the paperwork to ensure there are no delays.
- FHA Home Appraisal – This is done by an FHA-approved appraiser and is meant to ensure that the property is safe, habitable, and secure. It will also give the loan company an idea of how much the home is actually worth.
- Loan Conditional and Approval – The process now moves through several facets: first, it may be listed as conditional, which means you need to provide more information. Then, it will finally be listed as Loan Approved. This is called “clear to close” and means that our loan officers can schedule your closing date. The title company will reach out to give you the wire transfer information so you can send your closing costs to them.
- Close the FHA Loan – You and your lender will set a closing date, where you will meet to sign paperwork, pay closing costs, and collect your keys. Congrats! You’re officially a Kansas homeowner. Pack your bags and look forward to the perks of homeownership.
Why Choose Pride Lending for Your FHA Loan in Kansas?
Pride Lending offers excellent customer service to home buyers of all lifestyles. Our team prides itself on offering a safe, inclusive, and welcoming home-buying experience. Whether you want to learn more about FHA, refinance, USDA, VA, or conventional mortgages, we’re here for you. We have a variety of programs that fit every need.
Our client reviews are just a glimpse into how important relationships are to us. We specialize in helping underserved populations purchase their first home at an affordable rate. Our team is composed of allies and members of marginalized communities, including BIPOC and LGBTQ+ individuals, who are all committed to ensuring everyone has access to financing, no matter their identity.
We know how complicated the home-buying process can be, especially in today’s market, and that’s why we aim to make it easier and more convenient for you.
A streamlined loan application process takes a lot of the stress out of buying a home in Kansas.
We love helping first-time home buyers achieve homeownership. Our team is here to help with all your buying needs. Call us today at 725-231-0192 or begin your loan application with our easy-to-use online application.
