What is a FHA Home Loan?The Federal Housing Administration (FHA) was established in 1934 to improve housing standards and conditions and to provide an adequate home financing system through insurance of mortgages. Families that would otherwise be excluded from the housing market were finally able to buy the homes of their dreams. An FHA loan allows you to buy a house with as little as 3% down, instead of the higher percentages required to secure many conventional loans. Taking advantage of the FHA loan program is a great way for first time buyers, or anyone with a shortage of down payment funds, to buy a home.
The FHA does not make home loans, but rather insures them. If a home buyer defaults, the lender is paid from the insurance fund. This is a perfect mortgage solution for those starting out or those having a tough time qualifying for conventional loans. Advantages of an FHA Home Loan- Low down payment requirement of just 3%
- More lenient on credit ranking as opposed to a conventional loan
- Borrower can add closing costs to the loan amount
- Offer very similar rates to conventional mortgages
- Government has recently increased FHA Loan amounts to qualify more homes (view a full list here)
FHA Loan Requirements- Must be able to make a 3% down payment
- There is a 2.25% closing cost (can be added to the loan)
- Be able to show proof of 3 years of continuous income
- Have proof that you have paid all bills continuously for the past 3 years
- If you've had a bankruptcy it must be at least 2 years old and since have had a good credit standing (Chapter 7 - 2 years, Chapter 13- 1 year)
- If you've had a foreclosure it must be at least 3 years old and since have had a good credit standing
- Pay all title related costs (title search, title insurance, etc).
- Property must be single family homes, 2-4 unit properties, condominiums, or double wide and manufactured homes
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