FEDERAL HOUSING ADMINISTRATION
What is an FHA Mortgage loan?
A Federal Housing Administration Mortgage loan is also called an FHA loan. This is a government backed loan that is very popular among first time homebuyers. This loan is popular because it requires a smaller down payment than options like fixed rate loans, ARM loans or jumbo loans.
Investopedia defines an FHA loan as “A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment.”
FHA loans offer fixed and adjustable interest rates, just like conventional fixed and ARM loans. A fixed rate FHA loan protects you from rising interest rates for the term of the loan. This means your loan payment won’t change. However, property taxes, homeowner’s insurance premiums and homeowner’s association fees (HOA) can fluctuate. An adjustable interest rate FHA loan offers a lower, initial interest fixed-rate which ranges from 3 to 10 years. After this initial fixed-rate period ends, the interest rate changes annually.
An FHA loan is great for borrowers with low credit scores or borrowers with a recent bankruptcy. This loan requires as little as a 3.5% down payment but comes with more rules and stipulations. Since the FHA insures the loan, a lender generally offers more flexible credit requirements.
FHA loans are offered in 30 year terms, 15 year terms or sometimes in 10 year terms.
A 30-year loan is common and offers a lower monthly payment. In choosing a 30-year loan you will pay more interest over the life of the loan. A 15-year loan often offers a lower interest rate. Monthly payments are higher, but there will be less interest. A 10-year loan also offers a lower interest rate than a 30-year loan. You’ll pay even less interest over the life of the loan compared to a 15-year loan, but your monthly payments will be much higher.
3.5% down payment
Fixed rates available
Gift funds allowed for assistance with down payment
Higher sales price and 6%income limits allow more buyers to qualify
Upfront Mortgage Insurance can be financed into the loan
Typically allows seller paid closing costs up to 6%
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Note: Integrity Home Mortgage Corporation is not affiliated with or acting on behalf of or at the direction of the FHA or the Federal government.