An FHA loan is a mortgage loan that is insured by the Federal Housing Administration. Essentially, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments. Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of as low as 3.5 percent is required. Borrowers who cannot afford a traditional down payment of 20 percent, or can’t get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan. Contact me today and I'll walk you through whether an FHA loan would be the right choice for you.
Below I've listed a few key points for FHA loans:
- Available in a variety of fixed-rate and adjustable-rate loan options.
- Has down payment options as low as 3.5%.
- May allow you to use a gift or grant for all or a portion of the down payment or closing costs.
- Lets you add extra features such as a temporary buy-down.
- You typically have to pay upfront and monthly FHA mortgage insurance premiums.
- Requires less cash upfront for your down payment and closing costs.
- Available for all income levels.
- Allows a new buyer to take over the loan if you sell your home (subject to loan approval).
- Allows a co-applicant to help you qualify even if the person doesn't live in the home.
- FHA loans have the benefit of a low down payment but there are other loan products with the same option.
- I'll help you compare the overall costs of all products, including the monthly and long-term costs and conditions of the required mortgage insurance.
- You can typically only have one FHA mortgage at a time.
- In many instances, you may find FHA to be a more expensive financing option and should be considered after thoroughly evaluating all other product options that meet your credit qualifying and financial needs.