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The Department of Housing and Development (HUD), is the federal department responsible for the major housing programs in the United States. One of these programs is the FHA (Federal Housing Administration) loan. The government does not loan the homebuyer the money, they insure the loan, making it less risky for the lender to make this loan. The borrower pays the FHA Mutual Insurance, Mortgage Insurance Premium (MIP).

FHA Loan Highlights
An FHA loan is a mortgage insured by the Federal Housing Administration.
Contrary to popular belief FHA loans are not just for first time home buyers.

• Low down payments. FHA loans usually require just a three percent down payment. Down payments can also be gifted to the borrower from family members.
• Low closing costs. FHA currently restricts the amount of origination fees to be a maximum of one percentage point. This usually means lower closing costs than a conventional mortgage.
• Easy credit qualifying. Those with less-than-perfect credit are more easily approved for a loan through FHA programs because the federal government insures them therefore allowing the banks to lend more freely.
• Lower overall costs. An FHA loan can have a much better interest rate, which cuts down on the overall cost of the loan.

Eligibility requirements

• You must have a valid Social Security Number, be a legal resident of the United States.
• You must qualify for the mortgage by checking income, assets, debt load and credit history.
• Property must be Owner occupied
• Typically, the only income limitation is to have enough income to afford the mortgage in addition to other debt payments.
• There is not a minimum credit score required to qualify for an FHA loan.

Good candidates
Certain borrowers are better suited for an FHA loan than others.

• First-time home buyers, an FHA loan may is a good choice. It can help you get a better rate than a conventional mortgage and you do not have to have a large down payment.
• Those who can only afford a small down payment or those who were given the down payment as a gift often find an FHA loan to be a good choice. It only requires 3.5 percent down and the down payment can be a gift from a family member or other source.
• If you have less-than-perfect credit, an FHA loan might be your best option. Because the Federal Housing Administration insures the loan, lenders can provide a loan to a borrower with poor credit without needing to charge exorbitant interest rates.

For more information on FHA loans contact Schaefer Mortgage Today!

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