An FHA loan is a government-backed mortgage insured by the Federal Housing Administration or FHA for short. Popular with first-time homebuyers, FHA home loans require lower minimum credit scores and down payments than many conventional loans. Although the government insures the loans, they are actually offered by FHA-approved mortgage lenders. FHA loans come in 15- and 30-year terms with fixed interest rates.
Minimum 3.5% down payment with financed and monthly MIP. Use gift or grant funds for down payment
Required on all FHA Loans both financed upfront and monthly
Lower ongoing monthly mortgage insurance premiums than other loan types
Loan amounts up to $548,250 (conforming limits) and $822,375 for high-cost areas
Seller can contribute up to 6% of sales price towards closing costs
Mortgage can be taken over (or “assumed”) by qualified buyers when the home is sold
Mortgage Insurance Premium, also known as MIP, is required on all FHA loans. They are fixed rates regardless of your credit score and debt to income unlike private mortgage insurance with conventional loans. The amount you pay varies on the amount being borrowed and your loan-to-value (LTV).
1. Upfront – the upfront mortgage insurance premium (UFMIP) is either financed into the loan amount or paid at closing
2. Monthly – the ongoing, annual mortgage insurance premium, varies based on several factors, including the amount being borrowed and the loan-to-value (LTV). It does not cancel unless you put 10% or more down.