Overview
An FHA loan is a mortgage that’s insured by the government. FHA loans typically require lower down payments & people with lower credit may be more likely to get approved.
Smaller Down Payment
Purchase your home with as little as 3.5% down payment. Compared to 20% required on most conventional loans.
More Term Options
30, 25, 20 and 15-year terms are all available with fixed rates. 5-year adjustable rate mortgage available.
Employment & Debt
You need to make enough money to cover your bills. A lender doesn’t want to see a large percentage of your income going towards debts.
Pay Off Any Time
Pay your mortgage off at any time without pre-payment penalties.
An FHA loan provides a government-insured loan with flexible loan options.
What is an FHA Loan?
FHA loans are mortgages backed by the U.S. Federal Housing Administration. Lenders, such as banks and credit unions, that provide FHA loans provide funding for home purchases while requiring a lower down payment. Buyers may get into a new home with as little as 3.5% down.
Using conventional loans, a lower down payment requires the borrower to get private mortgage insurance. This special type of insurance protects the lender just in case the borrower is not able to pay. The cost of PMI is added to the monthly payment until the amount of the loan reaches 20%. FHA loans, on the other hand, do not require PMI because they are backed by the U.S. government. Additional scrutiny is often required during the loan application process using an FHA loan.
What is Required for an FHA Loan?
Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580. FHA loans are only available for the borrower’s primary residence.
Credit requirements may also be lower for FHA loans, given other factors demonstrate that the borrower is able to manage their money responsibly. Each lender looks at individual applications and may ask for additional documentation or explanations. They are often able to work with buyers with a lower credit score or shorter credit history than in other situations.
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