Low Down-Payment
A FHA mortgage can be an attractive option to many first-time homebuyers, as down-payment requirements for a FHA mortgage can be as low as 3.5%.
FHA at a Glance
- FHA Loans offer a loan guarantee for mortgage companies. If you acquire a FHA Loan to purchase a home, the FHA is not actually lending money to you, the buyer; the FHA simply guarantees the lender in case you, the borrower, default on your mortgage payments.
- You can pay as little as 3.5% of the purchase price of your home for your down payment, and finance your closing costs with your mortgage loan. The FHA can guide you toward programs that require no down payment.
- You can purchase a home in need of repairs and finance the repair costs with the mortgage. This way you can make the necessary repairs immediately without having to come up with the money yourself.
- You can purchase manufactured homes and condominiums with a FHA Loan.
- You can finance the cost of energy-efficient repairs with the mortgage.
What is the FHA?
The Federal Housing Administration, generally known as "FHA", is the largest government insurer of mortgages in the world, insuring over 35 million properties since its inception in 1934. A part of the United States Department of Housing and Urban Development (HUD), FHA provides mortgage insurance on single-family, multifamily, manufactured homes and hospital loans made by FHA-approved lenders throughout the United States and its territories.
What is FHA Mortgage Insurance?
For the homebuyer, FHA-insured loans offer competitive rates, smaller downpayments, greater flexibility in calculating household income and payment ratios, and protection requirements against foreclosures.
FHA mortgage insurance protects lenders against loss if the homeowner defaults on his or her mortgage loan. While FHA insured-loans must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan.
Why does FHA Mortgage Insurance exist?
Unlike conventional loans, FHA-insured loans require small down payments. There is more flexibility in an FHA loan than conventional loans in calculating household income and payment ratios.
The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost will drop off after five years or when the remaining balance on the loan is 78% of the value of the property-whichever is longer.
Recieve up to $8,000 back
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