FHA Loan Overview
An FHA loan can be used to buy a house or refinance an existing mortgage. You can buy a house with a lower down payment than a conventional loan, or use a streamline refinance to lower your current payment, with less documentation than a traditional loan.
What Is an FHA Loan?
An FHA home loan is a mortgage insured by the Federal Housing Administration. These mortgages are backed by the federal government, which helps FHA-approved lenders extend home financing to buyers who are unable to qualify for a conventional home loan. The FHA doesn’t issue mortgages, the agency provides insurance on mortgage payments, so more borrowers are able to attain home financing.
FHA loans are designed to make home ownership more affordable. Though they were originally intended for borrowers with less than perfect credit, they are now popular with a wider group of borrowers.
FHA Loan Requirements
Since there are many FHA home loans, and FHA loan requirements vary depending on the loan type, usually the credit stipulations are more lenient but the loan requirements are stricter.
- Less than perfect credit okay
- Maximum financing available with 580 FICO
- Low down payments
- Gifts or grants allowed toward down payment
- Sellers, builders, or lenders may pay some of borrower's closing costs
- 30% housing ratio
- Higher home inspection standards
FHA Loan Benefits
FHA loans enable more people to achieve home ownership by allowing borrowers who have less than perfect credit, no credit history, or who may have experienced some financial missteps, like a foreclosure or bankruptcy, to qualify.
The program has become popular with first time home buyers and move up buyers because you can buy a house with a low down payment, qualify easier with lower underwriting standards and FHA loans traditionally have lower rates than conventional loans.
With low rates, low down payment options, and flexible lending guidelines this loan type is a top choice for today's buyers.
FHA MIP is what makes FHA loans possible. Over the past few years FHA MIP has dropped making it even easier to qualify.
- Wide Variety of FHA Loan Products: Whether it is a 30 year fixed, 15 year fixed or a 203k loan, FHA has you covered.
- FHA Allows Low Down Payments: With a low down payment option, more people can buy a new house. This is great for first time home buyers, those who have little money to put down, or simply for those wanting to keep reserves in the bank.
- FHA Allows 100% Gift Funds: In addition to a low down payment, those funds can come from a gift.
- FHA Insures All Types of Properties: They are available for single-family detached homes, 2-4 unit homes, condos, and manufactured homes.
- FHA Streamline Refinance: One of the best things about FHA loans is the ability to Streamline Refinance. This is the easiest way to refinance as there is no credit qualifying, no income verification, and no appraisals required.
FHA Loan Options
FHA Fixed Rate Mortgages
FHA 15 Year Fixed Rate Loan:
- All the benefits of a 30 Year Fixed Rate Loan
- Save thousands in interest over the life of the loan
- Build equity faster
- Pay your house off sooner
FHA 30 Year Fixed Rate Loan:
- No prepayment penalties
- Low down payment options
- Gift funds allowed
- Ability to Streamline Refinance
FHA 203k 30 Year Fixed Rate Loan:
- 203k is a renovation loan program that helps borrowers buy a fixer-upper or make improvements to their existing home
FHA Adjustable Rate Mortgages
FHA 5/1 Adjustable Rate Mortgage:
- Keeps interest rates low for 5 years
- Introductory interest rates are typically lower than fixed rates
- Good for buyers who plan to own the home for a short time or refinance in a few years
FHA Streamline Refinance Loans
FHA Streamline 30 Year Fixed Rate Refinance Loan:
- Lower your payment by lowering your current interest rate
- Convert an FHA Adjustable Rate Mortgage into a fixed rate mortgage
- FHA Streamline refinance loans require less documentation than a traditional loan
- No appraisal required
- No income documentation
- Easy to qualify
- No appraisal required
FHA 203k Streamline 30 Year Fixed Rate Refinance Loan:
- FHA 203k allows borrowers up to $35,000 cash out to pay for home improvements or renovations.
FHA Streamline 5/1 Adjustable Rate Refinance Mortgage:
- FHA 5/1 ARM establishes a lower initial interest rate for the first five years, then the market determines your rate
- Adjustable Rate Mortgages typically have lower rates than fixed rate loans
- Useful if you plan on selling your home in the near future.
Don’t forget to ask about our I CAN mortgage, so you can customize the terms of your loan.