FHA Loans
FHA (Federal Housing Administration) loans are a type of mortgage loan that is insured by the Federal Housing Administration, which is a part of the U.S. Department of Housing and Urban Development (HUD). These loans are popular among first-time homebuyers and individuals with lower credit scores or limited financial resources, as they offer more flexible qualification criteria compared to conventional loans.
Here are some key points about FHA loans:
Loan eligibility: FHA loans are available to both first-time homebuyers and repeat buyers. There are no income limits, but borrowers must have a valid Social Security number and be able to demonstrate a steady employment history.
Down payment: One of the advantages of FHA loans is the lower down payment requirement. The minimum down payment is typically 3.5% of the purchase price. This is significantly lower than the typical 20% down payment required for conventional loans.
Mortgage insurance: FHA loans require mortgage insurance premiums (MIP). Borrowers pay an upfront premium at closing, usually financed into the loan, as well as an annual premium that is divided into monthly payments. The MIP serves as insurance for the lender in case the borrower defaults on the loan.
Credit score requirements: FHA loans are more lenient when it comes to credit scores compared to conventional loans. While there is no specific minimum credit score required, most lenders prefer borrowers to have a credit score of at least 580. Borrowers with credit scores below 580 may still qualify but might need to provide a larger down payment.
Loan limits: FHA loans have maximum loan limits that vary by county. These limits are set annually and are based on the median home prices in the area. Higher-cost areas generally have higher loan limits.
Property requirements: FHA loans can be used to purchase a variety of property types, including single-family homes, multi-unit properties (up to four units), condominiums, and manufactured homes. However, the property must meet certain minimum standards set by the FHA.
Streamline refinance: FHA loans offer a streamline refinance option, which allows borrowers with existing FHA loans to refinance without a full credit check or income verification. The streamline refinance is designed to lower monthly mortgage payments and is available to borrowers who have made at least six monthly payments on their current FHA loan.
