FHA Mortgage Loan

FHA Mortgage Loan

An FHA loan is a government insured home loan designed to help people purchase a home they would not otherwise be able to afford. The requirements to qualify for an FHA home loan are much more flexible than those for traditional home loans, since they are backed by the United States Federal Housing Administration (FHA). There are many programs and loan types backed by the FHA.

These mortgages can be either adjustable or fixed rate, and include monthly mortgage insurance premiums (MIP). FHA mortgage loans provide home buyers with several advantages over loans backed by Fannie Mae or Freddie Mac. These loans offer low down payments, just 3.5% and offer programs to those who have had foreclosure, short sale, or bankruptcy.

FHA Mortgage Loan

Benefits of FHA Loans

  • Low Down Payments. FHA mortgages may require down payments as low as 3.5% and can come in the form of a gift. The maximum seller assistance for FHA loans is 6%.
  • Lower Credit Score Requirements. One of the benefits of the FHA loan program is that applicants with little credit history or outstanding debt may still qualify.
  • Great for Refinancing. Many homeowners with adjustable-rate ARMs convert their loans to fixed-rate FHA loans by refinancing.
  • Less Money Out of Pocket. You’ll save money on the down payment as well as pay less for closing costs with an FHA loan.
Benefits of FHA Loans

FHA Home Loan Requirements

There are some basic requirements that are standard for all of the FHA loan programs that home buyers must meet to be eligible. If you meet these requirements, then you will most likely be able to obtain an FHA loan. The property being purchased must also be eligible for the buyer to receive an FHA insured loan.

Requirements most lenders will want buyers to meet include:

  • Two years of steady employment and income, or documents verifying income if self-employed
  • Credit report should have less than 2 late payments in the last two years
  • The minimum down payment for FHA loans are 3.5%
  • Minimum credit score of 580 or higher, and in some instances no credit score at all
  • Foreclosures and Bankruptcies must be at least 2 years old with good credit history since
  • Your payments should be 30% of your gross income
  • The maximum loan amount will vary based on state and county
FHA Home Loan Requirements

Types of FHA Loans

The FHA has a variety of programs that are designed to help first-time homebuyers, senior citizens, and low to moderate income families. FHA loan programs have helped close over 34 million mortgage loans since they were created in 1934, and continue to help Americans finance their mortgages today. If you have less than perfect credit or limited funds for a down payment, an FHA mortgage may be a good choice for you.

FHA mortgages can be used for purchase, refinance, or even cash out refinances. The maximum LTV for a cash out loan is 95% of the total mortgage amount, providing the loan amount equals to or less than $417,000, though most lenders tend to limit that figure to 85%. If the loan is being used for a refinance, the streamline finance program is a simple and fast option that offers a ton of flexibility. As before mentioned, FHA loans can come with an adjustable-rate or fixed-rate.

Types of FHA Loans

FHA Mortgage Loan Limits

One of the most attractive features of FHA ensured mortgages are that you can borrow more money than you could with a conventional loan. The limits for FHA loans are higher than Fannie Mae and Freddie Mac’s. There is a maximum loan amount which the FHA will ensure. The maximum amount of money given to a home buyer is known as an FHA loan limit, and this varies based location and the type of home you are financing. Limits can range up to $1,403,400. This figure is 17% above the limits for loans from Fannie Mae or Freddie Mac.

FHA Mortgage Loan Limits

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