The Federal Housing Administration, a division of the US Department of Housing and Urban Development, was formed in 1934 to encourage home ownership by providing affordable housing opportunities with flexible credit requirements and low down payments. The FHA does not lend money but insures loans made by FHA-approved lenders such as Franklin First Financial.
The guidelines for FHA insured loans are less stringent than those for Conventional Home Loans. The minimum down payment requirement is 3.5%, all of which may come from a gift source allowable by the FHA. The credit requirements are less strict as well, allowing borrowers with lower credit scores, and even prior bankruptcies and foreclosures to often qualify for an FHA insured loan. Additionally, the debt to income ratios are more lenient than on a Conventional Loan. Sellers concessions and gift funds are also allowed to help pay for closing costs and pre-paid expenses.
All FHA insured loans require an Upfront Mortgage Insurance Premium (MIP) which may be financed into the loan, along with an Annual Mortgage Insurance Premium which is paid monthly with the mortgage payment. This insures the lender against default by the borrower. FHA lending limits vary and are based on the county in which the property is located.
An FHA loan may be used to purchase or refinance a 1-4 family home, an FHA approved Condo or an FHA approved Planned Unit Developments (PUD). Co-ops do not qualify for FHA insured loans. The subject property must be owner occupied, and the borrower may only have one FHA loan at a time.
For more information on FHA insured loans or to see if this is the loan product that fits your needs, contact us today at 888-933-8639.