FHA Loan

What is an FHA Loan?

An FHA loan is a type of mortgage that is guaranteed by the Federal Housing Administration (FHA), which was created in 1934 to help boost home sales during the Great Depression. The FHA financially guarantees loans, which means that they assume much of the risk of non-payment and foreclosure from private lenders. It is important to note that the FHA is not a lender, but they guarantee your loan to make it more accessible for borrowers.

One advantage of an FHA loan is that bankruptcy is not an automatic disqualification, unlike with some other types of loans. Additionally, FHA loans typically have lower interest rates and require a smaller down payment than conventional loans. They also have lower mortgage points and other closing cost requirements, making them more affordable for borrowers.

However, there are some features of FHA loans that borrowers should be aware of. For example, a down payment is still required, and there is a higher upfront Mortgage Insurance Premium (MIP) than with conventional loans, although monthly MIP payments could be lower. Loan limits are also lower than with conventional loans, and MIP is required regardless of the Loan-to-Value (LTV). Nonetheless, FHA loans only require a 3.5% down payment.

FHA loans permit lower credit scores, as low as 580, and the down payment can be a gift from a family member. There are also minimum time periods of 2 years after bankruptcy and 3 years after foreclosure before being eligible for an FHA loan. The maximum seller assist is 6%, and FHA loans are available for loan amounts ranging from $125,000 up to county loan limits. All FHA loans are fixed-term mortgages and are only available for single-family primary residences. They are also available for single- and multi-wide, condos, and PUDs.

For more information on FHA loans, you can visit the FHA's website at
www.fha.gov.

Advantages:

Bankruptcy not an automatic disqualification
Lower interest rates
Down payment is less
Lower mortgage points and other closing cost requirements
Resale can be made more quickly
Is backed by the U.S. government
Features:
Down payment required
Higher upfront Mortgage Insurance Premium (MIP) than on conventional loans but monthly MIP could be lower
Loan Limits are lower than conventional
MIP required regardless of the Loan-to-Value (LTV)
FHA 3.5% Down Payment
Lower Credit scores permitted (as low as 580)
Down Payment can be a gift from a family member
Minimum 2 years from Bankruptcy
Minimum 3 years from Foreclosure
Max 6% Seller Assist
640+ FICO
Loan amounts from $125,000 up to county loan limits
All fixed term mortgages
Single family primary residences
Available on single- and multi-wide, condos and PUDs
2-1 and 1-0 Temporary Rate Buydowns available for primary purchases