FHA Home Loans

What is an FHA Home Loan?

These loans are programs offered by participating lenders which are insured by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD).

What are the benefits of an FHA Home Loan?

Down payments as low as 3.5%

The seller can contribute up to 6% of the sale price

A parent or relative can co-sign on the loan as a non-occupant.

FHA loans do require mortgage insurance to protect lenders from losses as a result of defaults. Upfront mortgage insurance premiums can be financed as part of the loan. You will be responsible for paying the annual insurance premium.

Who is eligible for an FHA Home Loan?

An underwriter will analyze your income, assets, liabilities, and credit history when you apply. Less-than-perfect credit does not necessarily prevent you from qualifying. You must meet the following requirements:

You must have at least 3.5% of the purchase price for a down payment

Your monthly mortgage payment cannot exceed 45% of your monthly income

You must have two years of consistent employment and verifiable income

What kinds of properties can FHA Home Loans be used for?

The following kinds of properties are eligible:

• 1-4 unit primary residences
• Condo units approved by FHA
• Manufactured housing (must have a permanent foundation and be considered a permanent dwelling)

Advantages of FHA Home Loans for first-time buyers

If you are trying to buy your first home and are concerned about your ability to do so, an FHA Home Loan may be exactly what you need to achieve your goal. A non-occupant parent or relative can be a co-applicant on the loan, helping your chances of being approved, and your down payment can be as low as 3.5%, greatly reducing your up front costs and the amount of time you’ll need to spend saving for a down payment.

Looking at buying a fixer-upper?

The FHA offers another kind of loan, the FHA 203(k), which bundles money for repair and renovation along with the financing for purchase. Limited FHA 203(k) loans allow you to borrow for up to $35,000 in eligible repairs. Standard FHA 203(k) loans require a minimum of $5,000 in repairs, but have no maximum and permit more extensive structural work. An appraisal is required for Standard FHA 203(k) loans.