An FHA loan is a mortgage loan that is insured by the Federal Housing Administration (FHA). The FHA loan is very popular in today’s market mostly especially with first time home buyers because the requirements are less strict than the conventional loans.
Some of the features are the following:
Down payment as little at 3.5%
Credit score 580 or higher.
Credit scores can be between 500-579 if a 10% down payment is made.
One thing to consider however is that the lower your FICO score, the higher the rate typically. Contact us if you need assistance in reviewing your credit.
Now, another advantage of the FHA loan is that it can be assumable, meaning that if you want to sell your home, the buyer can “assume” the loan you have. This is very helpful for people who have had a bankruptcy but can still qualify for an FHA loan.
Is Mortgage Insurance Required?
Due to the reduced strict standards of a conventional loan, two kinds of mortgage insurance premiums are added. They are as follows:
Mortgage Insurance premium: Paid in full or can be financed into the loan. Typically 1.7% of the home loan.
Monthly Payment or Annual MIP: called an annual premium but is paid out monthly based on loan size, LTV, length of loan.