FHA Loans in Tacoma, WA: Understanding Eligibility Requirements

Published:
December 4, 2024
Last updated:
December 4, 2024
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Home buyers in Tacoma, Washington have a lot of different mortgage options to choose from, and that includes the popular FHA loan program.

FHA-insured mortgages allow you to buy a property in Tacoma with a down payment as low as 3.5%. They also have flexible qualification criteria, which means you don’t need perfect credit to qualify.

In this guide, we’ll look at the key requirements for FHA loans in Tacoma, WA and why they are so popular among home buyers.

How the FHA Loan Program Works

The FHA loan program can cause confusion among first-time home buyers in Tacoma who aren’t familiar with it. So let’s start with a brief introduction.

An FHA loan is a type of mortgage that gets insured by the U.S. government. These government-backed mortgages in Tacoma make it easier for people with lower credit scores or smaller FHA loan down payments to buy a home.

So there are three main parties involved: the borrower, the lender, and the FHA.

  • The borrower pays for it. When you get an FHA loan, you pay a mortgage insurance premium. It can be rolled into the loan and added onto the monthly payments. All borrowers pay these premiums.
  • The lender is protected. Mortgage lenders that participate in this program receive insurance protection. Specifically, it reimburses the lender for losses if a borrower cannot repay their mortgage.
  • FHA manages the fund. The FHA oversees this insurance fund. If you default on your loan, the lender can file a claim with the FHA. The FHA then uses the fund to pay the lender back, minimizing their loss.

As you can see, this mortgage program is built around insurance. It basically works like one big insurance fund, resulting in a more “forgiving” mortgage product.

Why Some Tacoma Home Buyers Use Them

Most home buyers in Tacoma use conventional mortgage loans when buying a house. A conventional loan gets originated (and sometimes insured) solely within the private sector, with no direct involvement from the government.

The FHA loan program comes in second, in terms of usage and volume.

So, why do some home buyers in Tacoma choose FHA? A few reasons:

  1. Smaller down payment. FHA-insured mortgage loans allow borrowers to make an upfront investment as low as 3.5%. This relatively small investment appeals to Tacoma home buyers who don’t have a lot of cash saved up.
  2. Flexible Debt-to-Income Ratios. FHA loans may be more forgiving compared to conventional loans.
  3. Lenient credit requirements. Borrowers who have had credit issues in the past can often qualify for an FHA loan, even if they’ve been turned down for conventional financing. The government backing allows lenders to be more flexible with their FHA loan requirements in Tacoma, WA.

And speaking of those requirements, let’s shift gears and look at what it takes to qualify for an FHA loan in Tacoma, Washington.

Key Requirements for the Program

Do you have decent credit and a manageable level of debt?

Can you come up with a 3.5% down payment on a home purchase?

If you answered yes to both, you might be a good candidate for an FHA loan.

The Federal Housing Administration requires all home buyers who use this program to make a down payment of 3.5% or more. This means the loan can cover up to 96.5% of the purchase price, with the borrower covering the rest. This trait makes these types of low down payment home loans in Tacoma appealing to many buyers, especially those with minimal capital to invest in a home.

Borrowers can also use gift money from a third party (like a family member) to cover the minimum required down payment for an FHA loan.

You’ll also need to have a manageable level of debt. The FHA prefers borrowers to use no more than 43% of their monthly income on their combined recurring debts, including the mortgage payments. But there’s some flexibility here as well.

The most important qualification has to do with your income situation. The lender will review your income and employment status to make sure you can comfortably afford the monthly payments. This is in everyone’s best interest.

Buyer-Friendly FHA Loan Limits in Tacoma, WA

FHA loans also have limits as to their maximum size. These limits can vary from one county to the next because they’re based on home prices.

But these limits shouldn’t be a problem for most buyers in Tacoma.

While they can vary by county, the size limits for FHA loans are applied consistently across metropolitan areas. So all counties located within a specific metro area tend to have the exact same FHA loan limit.

Here’s how the Federal Housing Administration explains it:

“FHA’s Single Family forward mortgage limits are set by Metropolitan Statistical Area (MSA) and county and are published periodically … The limits in these areas are set using the county with the highest median price within the MSA.”

The 2025 FHA loan limit for Tacoma and all of Pierce County is $1,037,300.

The entire Seattle metro area receives a relatively high loan limit, mainly due to high home prices in cities like Bellevue and Sammamish.

The city of Tacoma, on the other hand, has much lower home values. As of late 2024, the median house value for the city was around $475,000. That’s much lower than the median price for the broader metro area.

Despite this relative affordability, Tacoma still has an FHA loan limit north of $1 million due to the metro-level assignment process described above.

If you use an FHA loan to buy a house in Tacoma, you should have plenty of financing room without coming anywhere near the loan limit. Most properties listed for sale in Tacoma, Washington are priced well below the FHA loan limit for Pierce County.

How to Apply For an FHA Loan in Tacoma

To apply for an FHA loan in Tacoma, WA, follow these steps:

  • Determine Eligibility: Ensure you meet FHA requirements, including a minimum credit score of 580 (or 500 with a 10% down payment) and a manageable debt-to-income ratio.
  • Find an FHA-Approved Lender: Work with a lender authorized to offer FHA loans.
  • Get Pre-Approved: Submit proof of income, credit history, and other financial documents for lender evaluation.
  • Choose a Property: Select a home meeting FHA property standards.
  • Complete Application: Finalize the loan process with your mortgage lender.

Have Questions About FHA Loans in Tacoma, WA?

Sammamish Mortgage offers FHA loans as well as conventional for home buyers in Tacoma, WA. We serve the entire state of Washington and can help you choose the best financing option. Visit our website to get an instant rate quote, or call our office today to get your questions answered!

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