FHA Loan

A Government-Backed Mortgage Loan

An FHA loan is insured by the Federal Housing Administration and can be used to buy a home or refinance an existing mortgage. An FHA loan has lower down payment and credit requirements – making it a great option for low-to-moderate-income and first-time homebuyers.

In addition, FHA streamline refinances allow borrowers to refinance their existing mortgage with minimal documentation.

Benefits of FHA Loans

• Lower credit score requirements as compared to other loan options
• Minimal down payment of 3.5%
• Fixed or adjustable rates and 15 or 30-year terms
• Allows gift funds
• Insures different types of properties
• Streamline FHA refinance is usually faster than a typical refinance since it doesn’t require any income verification, appraisal, or credit qualification
• Closing costs can be financed into the loan

Property Requirements for FHA Loan

• Down payment of at least 3.5%
• Minimum credit score of 580 or higher
• Debt-to-income ratio of less than 50% and consistent employment history required
• Additional funds required upfront for mortgage insurance premiums. The upfront mortgage insurance premium equals 1.75% of your actual loan amount.
• Closing costs will typically be anywhere between 2% to 6% of the purchase price

Requirements of FHA Loan

• FHA loan limits should be considered based on your area. Check them out here. The 2021 maximum FHA loan limit for most of the regions in the US is $356,362 for a single-family home
• Property must meet the minimum property standards defined by the Federal Housing Administration.
• Safety – the property should not affect the health and safety of the neighborhood
• Soundness – the property should be defect-free to avoid any fault in the structural integrity
• The homebuyer must occupy the property within 60 days of closing
• Property must be borrower’s primary residence