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What is a FHA Mortgage Loan?
The Federal Housing Administration, also known as FHA, was established in 1934 under the U.S. Department of Housing & Urban Development also known as HUD.
FHA loan programs were created to provide affordable financing with low down payment requirements for homebuyers who may not qualify for a traditional Conventional mortgage loan.
Unlike Conventional loans, FHA loans will approve applicants with a 580 credit score, and only require 3.5% down payment compared to the 5% normal down payment on Conventional loans.
Due to the increased risk of lower credit scores and lower down payments, FHA loans require FHA mortgage insurance (MIP). The FHA mortgage insurance premium is paid by the borrower.
This mandated FHA mortgage insurance policy insures participating mortgage lenders from potential losses due to lower down payments, lower FHA loan interest rates, and easier credit qualifying standards.
Every FHA loan issued will have a one-time 1.75% upfront mortgage insurance premium cost and annual mortgage insurance premium that varies based on the amount of down payment and loan term.
The additional cost for mortgage insurance under FHA Loan Programs is offset by lower interest rates compared to conventional mortgages.
FHA loans offer relaxed underwriting guidelines for easy FHA loan approvals for both buying a home or refinancing an existing residential property. This is a perfect loan program for borrowers who have credit scores between 550 and 620.
The Federal Housing Administration FHA, will adjust the cost of mortgage insurance premiums based on current market conditions. When FHA mortgage insurance premiums are decreased FHA borrowers can refinance under FHA Streamline to lower the cost of mortgage insurance.
All FHA Mortgage Loan Programs requires the upfront mortgage insurance premium & the monthly mortgage insurance premium that is included into the mortgage payment.
Most mortgage lenders are FHA approved lenders. With the lower-than-average interest rates offered by FHA most homeowners benefit from using FHA to finance their property.
FHA Loan Requirements Summary:
Available FHA LOAN Terms 30, 25, 20, 15 and 10 Year Fixed and Adjustable Rates
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* Primary Residence only
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* Single, Condo, Manufactured, Multi-family
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* 3.5% Down-Payment on purchase
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* 80% Cash-Out Loan to Value
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* Mortgage Insurance required
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* Lower Rate & Better Terms
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* 550 Minimum Credit Score
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* Debt to income ratio less than 50%
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* FHA County Loan limits apply
FHA Loan Programs
FHA loan programs offer borrowers mortgage financing for all types of loan request.
These programs are ideal for purchasing a home or refinancing an existing property to lower monthly payments, interest rates or access the equity in home with a cash-out mortgage refinance.
FHA loans offer home improvement loans, known as FHA 203K, that allow homebuyers and existing homeowners to finance the cost of improvements to any home for both purchasing or refinancing a home.
FHA Loans to Purchase a Home
FHA Purchase Loans offer homebuyers the ability to purchase a home with as little as 3.5% of the purchase price for a down payment for borrowers with a credit score of 580 or higher.
To qualify under the Federal Housing Administration's underwriting guidelines, borrowers must have a min. credit score of 550, 580 or higher is preferred and 2 years of employment income, unless previously retired or in college.
FHA Loans for Lower Payment
Existing homeowners are offered the ability to lower their monthly mortgage payment by using a FHA Rate and Term Refinance or a FHA Streamline Refinance that does not require income or appraisal documents as long as the current mortgage is a FHA loan.
The FHA Rate and Term and FHA Streamline do not allow borrowers to access the equity in their home.
Homeowners can lower the existing interest rate or refinancing the current loan balance back to a full 30-year term. This will help homeowners who are looking for every option to lower their monthly bills.
FHA Loans for Cash Out Refinance
This is a great program for homeowner in need of cash for investments, to purchase another property, pay for college, home improvements or personal matters.
An FHA loan to access the equity in a home, also known as a cash-out mortgage refinance gives homeowners the ability to refinance their current mortgage and receive cash at closing by using the equity in the home.
FHA loan interest rates are generally lower than personal loans and credit card finance charges.
FHA Loans for Debt Consolidation Refinance
A FHA debt consolidation mortgage loan gives homeowners the ability to consolidate their high interest rate debts like credit cards, auto loans, and personal loans into one monthly payment.
In many cases, the monthly savings realized by consolidating the debt affords homeowners the ability to pay their home off up to 40% faster.
FHA Loan 203K for Home Improvements
Under FHA 203K Home Improvement Loans, home-buyers and existing homeowners can finance the cost of remodeling their home into their first mortgage loan at the time of purchasing or refinance.
These renovation loan programs give homebuyers and existing homeowners the ability to make substantial upgrades and or improvements to the property.
FHA Mortgage Loan Limits (2023)
As of April, 2023 the max loan amount allowed for a standard area FHA Loan limits for a One-Unit Home is $472,030, 2 Unit Home is $604,400, 3 Unit Home is $730,525 and 4 Unit Home is $907,900.
However, in high cost areas, there are increased loan limits based upon the specific area the property is located in.
To check loan limits in your area, please give us a call and one of our licensed loan officers will be more than happy to assist and answer any questions you may have.
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