Home loans backed by the Federal Housing Administration (FHA) are an excellent option for homebuyers. Whether you have low income, poor or recovering credit, or haven't been able to save a large down payment, FHA offers an attractive path to homeownership. An FHA home loan is a government-backed mortgage that provides more flexibility than a standard conventional mortgage.
Similar to conventional mortgage loans, FHA loans are available as 15- or 30- year fixed or adjustable-rate loans. However, there are additional costs associated with FHA mortgage loans, such as monthly mortgage insurance premiums (MIP). FHA loans also require an upfront mortgage insurance premium.
Benefits of an FHA Mortgage
- Low down payment: FHA loans require a down payment as low as 3.5 percent
- Lower credit threshold: Buyers with short or poor credit histories may qualify for FHA loans
- Popular refinancing options: Buyers who chose adjustable-rate mortgage loans or negative amortization mortgage loans look to FHA to refinance
Requirements and Qualifications
- Loan amount: FHA will only lend up to a certain amount ($275,665 in most counties). In more expensive housing markets, FHA will guarantee loans up to $636,150.
- Home inspection: FHA has stricter guidelines for home inspections. The home must meet minimum requirements and be appraised by an FHA-approved appraiser.
- Higher fees: An upfront mortgage insurance premium (UFMIP) is required for most single-family FHA mortgage loans. This fee can be financed into the mortgage and paid over the term of the loan.
If you are looking to get into the real estate market, an FHA loan is a good fit for first-time homebuyers or buyers with less than perfect credit. But there are other options. Contact us today for a free consultation to find out which loan type is right for you.