Minimum down payment is 3.5% (escrow required).
Minimum credit score is 580.
No penalties for pre-payment of the loan.
Closing costs may be covered in the loan repayment.
Low interest rates are available, similar to conventional.
Short waiting period to requalify after foreclosure and short sale.
The major disadvantage of FHA loan is that they include mandatory mortgage insurance, thus adding to the cost of the loan. Mortgage insurance payments are divided into an upfront mortgage premium of 1.75% and an annual premium charged in small monthly installments. Another disadvantage of FHA loans is that many properties are ineligible (although this number is decreasing). Finally, FHA loans are less flexible and offer far less options than conventional loans.
Costly (MIP) mortgage insurance premiums due to low down payment.
Strict property requirements and thorough FHA inspection to qualify.
Limited loan contract terms available in comparison to conventional loans.
The maximum loan a borrower may receive from the FHA is dependent upon home prices in that geographic region. The highest have been reported in California and New York above $700,000. You may quickly research home loan limits in your area on the FHA Website.
Fixed-Rate Mortgage - For borrowers who plan to live in the house long term at a fixed interest rate.
Adjustable-Rate Mortgage - For Borrowers who do not plan to live in the house for more than 5 years.
Graduated Payment Mortgage - Increases the mortgage payment each year for chosen period of time.
Growing Equity Mortgages - Increases the mortgage payment with the increase of income.
Energy Efficient Mortgages - Increases the loan principal to allow for energy efficient upgrades.
Condominium Loans- Provides security to lenders and encourages fixed loans for new home buyers.
Homeowners with an FHA mortgage can streamline their refinance to new terms and rates. This process allows homeowners to skip verification for credit, income, and employment history, making the process much quicker and more convenient. In addition, FHA streamlined refinancing does not require a borrower’s property to be reappraised; instead, the FHA uses the original selling price of the home, significantly benefiting homeowners with underwater houses.
Single family homes - FHA will finance up to 97% of the home purchase price.
Condominiums - FHA will insure condos with 4 or more living units.
Manufactured homes - FHA will insure property 400 sq feet and larger.
Duplex units - FHA will insure duplexes if they are family owned and all units are lived in.
Contact local lenders that are FHA certified to lend FHA insured loans. The FHA merely provides compensation to the lender upon default of the loan by the borrower. Terms and qualification requirements vary by lender. Compare lenders in order to find the best terms to meet your needs.