The Federal Housing Administration (FHA) loan, explained
An FHA loan is a home loan issued by FHA-approved lenders and insured by the Federal Housing Administration. Because the government guarantees these loans, lenders are more willing to lend, which makes FHA loans a great option for those who want a low down payment or to refinance a loan with a higher loan-to-value consideration.
Characteristics of an FHA loan.
- Low down payment, typically a minimum of 3.5%; which is great for first-time home buyers
- Higher loan limits allow homebuyers to buy higher-priced homes with less down payment
- Borrowers must live in the home as the primary residence
- Requires a home appraisal by an FHA-approved appraiser*
- Requires borrowers to pay mortgage insurance premiums*
- Flip properties are allowed
- Credit scores to 640, flexible debt ratios, and seller contributions permitted
*Note: As of June 2012, the FHA launched its Streamline Finance program, which does not require an appraisal and offers significantly lowered mortgage insurance costs for borrowers who qualify. Call us at 866-612-5050 to see if you qualify for this new program!
Is an FHA loan the right mortgage option for you?
The FHA loan option is popular with first-time homebuyers with less cash available for a down payment. An FHA loan may be right for you if you:
- Have an FHA loan now and want to refinance
- Have a loan with an interest rate higher than today’s rate
- Prefer a loan requiring a lower down payment