FHA Loan

FHA Loan:

 

 

The FHA (Federal Housing Adminsitration) does not make loans. Rather, it insures loans made by private lenders. 

FHA's mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise credit-worthy borrowers that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for properties that meet certain minimum requirements, including manufactured homes, single and multifamily properties. The basic FHA mortgage insurance program is Mortgage Insurance for One-to-Four-Family Homes (Section 203(b)).

FHA allows first time homebuyers to put down as little as 3.5% and receive up to 6% towards closing costs. Specific FHA lender overlays may be tighter. For example some FHA lenders will only allow a seller to contribute a maximum of 3% toward allowable closing costs. If little or no credit exists for the applicants, the FHA will allow a qualified non-occupant co-borrower to co-sign for the loan without requiring them to reside in the home with the first time homebuyer. Unlike a conventional loan the co-signer does not have to be a blood relative.[6] This is called a Non-Owner-Occupied Co-Borrower. Depending on the state you reside in, you may receive a discount on your State Transfer Taxes at settlement. Again, the specific FHA lender's underwriting guidelines will have their own standards. Very few lenders will fund FHA loans for buyers without a minimum 640 FICO score. For below 640 FICO scores, interest rates will be higher.


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