FHA Loans


What is an FHA loan?

FHA loans are backed by the Federal Housing Administration (FHA). They require lower minimum credit scores and lower down payments than many conventional loans, which makes them especially popular with first-time homebuyers. FHA loans also help homeowners who have less than perfect credit. Things happen in life and sometimes you need a little help getting back on track.

What are some advantages of an FHA loan?

Besides being able to qualify with a lower credit score the minimum down payment is only 3.5% of the purchase price. What’s even better is the 3.5% down payment can be a gift.

Such gift funds can only come from, family members, the borrower’s employer or labor union, a close friend with a clearly defined interest, a charity, or down payment assistance programs for low to moderate income families and first-time home buyers. All gift funds will be required to be documented. What will you need, a gift letter stating there is no repayment required and bank statements showing from the donor’s account and showing the gift in your bank account.

What are some disadvantages of an FHA loan?

There will be an upfront mortgage insurance payment of 1.75% of the loan amount. This can be financed into the loan. You will also be required to pay a monthly mortgage insurance payment.

Unfortunately, with FHA loans you will be required to pay mortgage insurance even if the loan amount is less than 80% of the home’s value.

Can I finance a second home or investment home with an FHA loan?

Short answer, no. FHA will only finance owner occupied properties.

Can I finance 2 - 4 unit properties?

Yes, as long as you are going to occupy one of the units.