What are FHA Loans?
FHA stands for Federal Housing Administration, the government agency that insures FHA mortgages issued by FHA-approved mortgage lenders. Historically these loans have helped lower income Americans receive home financing. FHA mortgage requirements are therefore typically more lenient than those of other loan programs.
FHA Loan Requirements..
- Down Payment: 3.5% or greater.
- Credit Score: Our minimum is 600 or greater, but each lender sets own minimum, typically no lower than 580.
- Debt-to-Income Ratio (DTI): Typically between 45 – 50% or lower.
- Loan-to-Value Ratio (LTV): 96.5% or lower.
- Loan Limit (max allowable loan amount): Up to $625,500 in higher cost areas and as low as $271,050 in lower cost areas.
- Mutual Mortgage Insurance (MMI) is required depending on loan terms and down payment.
- FHA approval of property based on a home inspection.
FHA Mortgage Insurance Facts
- Upfront Mortgage Insurance Premium (UFMIP) of 1.75% the base loan amount.
- Monthly MIP (annual premium that is paid in 12 month installments) is currently paid on all FHA loans except those with terms less than or equal to 15 years and down payments greater than or equal to 22%.
- New FHA borrowers pay half a percentage point less on the annual mortgage insurance premium. Common annual premiums for 30 year loans range from 0.80% to 1.05%.
- Common annual premiums for 15 year loans or less range from 0.45% less than 90% LTV and 0.70% greater than 90% LTV.
- Monthly MIP is paid on all loans with less than 10% down payment for the life of the loan.
- Monthly MIP can be canceled on loans with 10% or more down payment after minimum of 11yrs.
FHA Loan Types
- Fixed-Rate Mortgages: Your mortgage interest rate is fixed for the life of the loan.
- Adjustable-Rate Mortgages: After a fixed period, your mortgage rate will fluctuate depending on a predetermined index and market shifts.
- Energy Efficient Mortgage program (EEM): You receive extra funds for energy efficiency home improvement projects at the closing of the loan. The funds for improvement are added to the principal loan balance.
- Condominium: Required loan type for condominium buyers.
- 203(k): You receive funding to both purchase a home and perform renovations.
- Manufactured homes: FHA will insure properties that meet specific guidelines.
- Attached and detached single family homes.
- 2-4 unit homes as long as you occupy one unit as a primary residence.
- Attached and detached planned unit developments (PUDs).
- Condominiums that meet FHA approval.