An FHA loan provides a government-insured loan with flexible loan options. Even experienced homeowners may need to plan for a long time for a new home purchase. Fortunately, FHA loans may help some buyers get into the home of their dreams with a lower down payment.

What is an FHA loan?

FHA loans are mortgages backed by the U.S. Federal Housing Administration. FHA loans gives another option to home buyers with lower credit scores (500s) while requiring a lower down payment (3.5% of the purchase price) and allowing a higher debt ratio.

Monthly Mortgage Insurance?

When using an FHA Loan, you will need to pay for private mortgage insurance, PMI. This extra amount is added to your monthly payment. Once you reach a higher amount of equity, either through paying your mortgage down or a significant change in the housing market, you may be able to refinance your loan so that you no longer have to pay PMI. Depending on how much you put down a down payment, this premium may no longer be required after 11 years.

What is required for an FHA loan?

Many of the same documents are required for an FHA loan that any potential lender will want to see: employment history, appraisal, debt-to-income ration. A few additional stipulations are also attached to the FHA loan process. Buyers may have to bring 3.5% of the purchase price as a down payment, more if they have a credit score below 580 (lower if you’re putting more down). FHA loans are only available for the borrower’s primary residence.

How FHA Loans Work

• Purchase your home with as little as 3.5% down payment.
• Multiple fixed adjustable rates terms are all available.
• No pre-payment penalty for paying your mortgage off earlier

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**Mortgage Approval Guide, LLC is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.