FHA Loan

A Government-Backed Mortgage Loan

An FHA loan is insured by the Federal Housing Administration and can be used to buy a home or refinance an existing mortgage. An FHA loan has lower down payment and credit requirements – making it a great option for low-to-moderate-income and first-time homebuyers.

In addition, FHA streamline refinances allow borrowers to refinance their existing mortgage with minimal documentation.

Benefits of FHA Loans

  • Lower credit score requirements as compared to other loan options
  • Minimal down payment of 3.5%
  • Fixed or adjustable rates and 15 or 30-year terms
  • Allows gift funds
  • Insures different types of properties
  • Streamline FHA refinance is usually faster than a typical refinance since it doesn’t require any income verification, appraisal, or credit qualification
  • Closing costs can be financed into the loan

Property Requirements for FHA Loan

  • Down payment of at least 3.5%
  • Minimum credit score of 580 or higher
  • Debt-to-income ratio of less than 50% and consistent employment history required
  • Additional funds required upfront for mortgage insurance premiums. The upfront mortgage insurance premium equals 1.75% of your actual loan amount.
  • Closing costs will typically be anywhere between 2% to 6% of the purchase price

Requirements of FHA Loan

  • FHA loan limits should be considered based on your area. Check them out here. The 2021 maximum FHA loan limit for most of the regions in the US is $356,362 for a single-family home
  • Property must meet the minimum property standards defined by the Federal Housing Administration.
    • Safety – the property should not affect the health and safety of the neighborhood
    • Soundness – the property should be defect-free to avoid any fault in the structural integrity
  • The homebuyer must occupy the property within 60 days of closing
  • Property must be borrower’s primary residence
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