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FHA Loan

FHA Loans:

FHA mortgage loans are issued by federally qualified lenders and insured by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development.

FHA loans are an attractive option, especially for first-time homeowners. In 2009, FHA will account for nearly 30% of new loans, up significantly from 2.8% in 2006 (www.hud.org). Some of the reasons for the growth of FHA loans are:

Generally easier to qualify for than conventional loans.
Lower rate for credit scores under 680.
Lower down payment requirements (3.5% of sales price)
Cannot exceed statutory loan limits.

There are a few things to keep in mind when deciding if a FHA mortgage is right for you. First of all, the minimum credit score is 620. Next, you may get a gift all of your downpayment from a related individual. There are also government grants available for those that qualify.

Also, all FHA mortgages require an upfront Mortgage Insurance amount of 1.75% of the loan amount be financed into the loan amount regardless of loan to value. You will also pay monthly mortgage insurance, but may not have to in certain instances. The seller may also pay up to 6% of the sales price towards your closing costs and pre-paid items.

When it comes to the appraisal on a FHA transaction, the property must not have any issues that a FHA appraiser may deem as health hazards. This may include peeling paint on properties built before 1978, missing siding, damaged staircases, or broken windows. Make sure that your real estate agent and property inspector are tell you of anything they deem as hazardous.

One feature about a FHA mortgage is that if you become disabled or have a hardship, FHA will work with you to help you stay in your home. Visit HUD's website to find out more about this great feature regarding FHA mortgages.

Use my Purchase Assistant to help clarify your options