Federal Housing Administration (FHA) loans are a popular mortgage option designed to help individuals and families achieve the dream of homeownership, especially if they have limited down payment funds or lower credit scores. These loans are insured by the FHA, a government agency within the U.S. Department of Housing and Urban Development (HUD). Here are some key features and considerations for FHA loans:
- Contract Duration: Typically 21 to 28 days from offer acceptance to closing, offering a relatively quick turnaround.
- Credit Score Requirements: While FHA loans do have credit score requirements, they are often more lenient than those for conventional loans. Borrowers with credit scores as low as 550 can qualify, but best results are seen with a score of 640 and above.
- Low Down Payment: A minimum down payment of 3.5% is required, which can make homeownership more achievable for many borrowers.
- Fixed or Adjustable Rates: FHA loans offer both fixed-rate and adjustable-rate mortgage options, providing flexibility to borrowers.
- Loan Amounts: Conventional have a maximum loan dependent on the purchase area. Check in with us to find your area’s limits.
- Upfront and Annual Mortgage Insurance Premiums (MIP): Borrowers are required to pay an upfront MIP at closing and an annual MIP throughout the life of the loan. The annual MIP can increase the overall cost of the loan.
- Property Requirements: FHA loans have property eligibility criteria, including standards for the home’s condition and safety. The property must meet FHA guidelines to qualify for financing.
- Compensation: Both lender and Borrower paid compensation