What is a FHA home loan?
What are the advantages of an FHA loan?
- FHA only requires a 3.5% down payment and the funds can come from a variety of different sources.
- Qualifying is easier and allows for lower credit scores and higher debt-to-income ratios.
- Down payment can come from gift funds, employers, labor unions, and down payment assistance programs.
- Gift funds must be received from a blood relative or someone married to a blood relative. Gift funds may not be in the form of cash and must be sourced by your lender.
- Important note. FHA loan limits are different than conforming limits and vary from state to state and county to county. Please have your loan expert verify the maximum loan amount available in the area you wish to purchase in.
Do I have to pay mortgage insurance?
All FHA loans require mortgage insurance. This protects the lender against losses that they would normally take in the event your home goes into foreclosure.
There are two types of mortgage insurance that you must pay with an FHA loan, up-front mortgage insurance, and monthly mortgage insurance. The up-front insurance is calculated as 1.75% of the loan amount and can be added to the loan. The monthly mortgage insurance varies depending on the amount of your down payment, but is usually .85% of the loan amount divided by 12 months. This total is added to the monthly payment and decreases slightly each month as your principal balance goes down.
Unlike a conventional loan, FHA mortgage insurance never leaves the mortgage unless you sell or refinance.
What is a FHA streamline?
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Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Finance of America. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.