Financing 101: FHA

One thing we get a lot of questions about from buyers is FHA financing, so we thought we’d take the time to clarify some FHA basics.

What is FHA?

FHA (Federal Housing Administration) provides mortgage insurance on loans made by FHA-approved lenders. FHA insures these loans on single family and multi-family homes.  FHA does not lend money.

How can FHA help me buy a home?

According the the U.S. Department of Housing and Development, FHA financing can be a great option for some buyers and homeowners:

FHA insured mortgages offer many benefits and protections that only come with FHA:

  • Easier to Qualify: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.
  • Less than Perfect Credit: You don’t have to have a perfect credit score to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it’s easier for you to qualify for an FHA loan than a conventional loan.
  • Low Down Payment: FHA loans have a low 3.5% downpayment and that money can come from a family member, employer or charitable organization as a gift. Other loan programs don’t allow this.
  • Costs Less: FHA loans have competitive interest rates because the Federal government insures the loans. Always compare an FHA loan with other loan types.
  • Helps You Keep Your Home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, FHA has many options to help you keep you in your home and avoid foreclosure.

With some programs requiring as little as 3.5% downpayment, FHA financing can offer many people the opportunity to buy who may not have qualified otherwise.   For those who do chose FHA mortgage insurance, borrowers should expect to pay an insurance premium upfront, as well as monthly insurance premiums that are added to the regular mortgage payment.

What are the eligibility requirements for FHA financing?

Most people living in the US, who are of legal age and have a valid social security number are eligible to apply for FHA financing.

FHA’s mortgage programs do not typically have maximum income limits for qualifying, although you must have sufficient income to qualify for the mortgage payment and other debts. Using FHA guidelines, lenders will make a credit determination based on the merits of each case.

To find an FHA approved lender in your area, click here.  For more information about FHA financing, visit the FHA resource center.


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