Federal Housing Administration Loans

What is an FHA loan?
An FHA loans is an attractive option, especially for first-time homeowners because it is insured by the Federal Housing Administration (FHA).  Primarily, 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 the borrower can be approved with 3.5% down vs 20% that is required on other loan programs.

Advantages of FHA loans

  • Lower down payments requirement of an FHA loan of 3.5%
  • Borrowers are qualified with lower fico score of 580 (lower fico scores than the 580 will require a higher down payment)
  • Borrowers that may not qualify for private mortgage insurance might get approved with an FHA loan
  • FHA loans are assumable meaning that a buyer of a home can assume the sellers’ FHA loan subject to FHA guidelines
  • The 3.5% down payment can also be gifted to a buyer by a member of his or her family
  • Qualifying debt ratios (front end and back end ratios) maybe higher for FHA loans
  • FHA loans can be used for cash out refinance when the property has gone up in value

Requirements for FHA Loans

  • Borrowers must have employment history of at least (2) years
  • FHA loan are only valid for owners of primary residences (investment property and 2nd homes purchases can not use FHA loans)
  • Borrowers must be out of Bankruptcy a minimum of two years before they can qualify for an FHA loan
  • Appraisal is performed by an approved FHA approved appraiser
  • An upfront mortgage fee premium is charged upfront by the FHA regardless of the borrowers’ credit score
  • An annual MIP (Mortgage Insurance Premium set by the FHA) is required to be paid monthly is also charged by the FHA. This MIP monthly premium will vary depending on the term of the loan and the amount of the loan and the loan to value ratio of the loan.

FHA Loan Forms

FHA loan Limits

Standard FHA loan limits are $271,050 for (1) unit, $347,000 for (2) units, $419,425 for (3) units and $521,250 for (4) units. These limits which are calculated and updated annually by FHA apply to all areas that are not considered high cost.

Please contact us for more info on high cost FHA loan limits.