- FHA loans are among the most popular loan programs available.
- FHA loans are insured by the Federal Housing Administration (FHA).
- FHA loans have competitive interest rates because the loans are insured by the FHA.
- FHA loans allow those with lower credit scores to qualify for mortgages.
- FHA loans enable homebuyers to obtain a FHA Mortgage with as little as 3.5% down.
- FHA loans are available as Adjustable Rate or Fixed Rate mortgages and have 15, 20, and 30 year terms.
- For a fixed rate FHA loan, the interest rate remains fixed for the life of the loan. The payments also remain level for the life of the loan and are structured to repay the loan at the end of the loan term.
- Borrowers must pay an Upfront Mortgage Insurance Premium (UFMIP) upon closing of the loan, which is added to the purchase price of the home.
- Borrowers must pay an annual mortgage insurance premium (MIP). This premium payment amount is based on the loan’s Loan-to-Value ratio and the timeframe of the loan.
- All FHA loans must be full income documentation and must be owner occupied.
- FHA loans were designed for first-time homebuyers and have liberal qualification criteria.
- There are FHA loan programs that allow lower credit scores.
- 100% of the down payment and closing costs can be gifted by a family member.
- Up to 6% sales concessions to cover discount points and closing costs are permitted.
- Non-occupying co-borrowers are allowed as long as they are family members.
- Debt-to-income ratios are more liberal as compared to standard conventional loans.
- FHA loans also take into account compensating factors (i.e. larger down payment, reserves, excellent credit, etc.) when evaluating the creditworthiness of a potential borrower.
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