FHA loans have been helping people become homeowners since 1934. How do they do it? The Federal Housing Administration (FHA), which is part of HUD, insures the loan, so your lender can offer you a better deal.
Low down payments? Low closing costs? Easy credit qualifying? Buying your first home? FHA might be just what you need.
Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan.
Want a fixer-upper? FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs - all in one loan.
The underwriter on an FHA loan will review the credit and payment history of a customer concentrating on the most recent 12 to 24 months. If the customer has had a good payment record over the past 12 to 24 months they can often get approved for a mortgage even when Conventional financing has turned them down. An experienced Mortgage Loan Originator can help the customer clearly tell their story and will often make suggestions as to how to make the file more acceptable to FHA. Because of FHA's leniency, some borrowers with past credit problems elect to use FHA for loans when they have a substantial down payment rather than getting a higher interest rate conventional loan. FHA tends to be more flexible than Conventional financing in the money needed to purchase the home.
FHA allows the borrower to get the funds necessary to close from several sources. They include such areas as personal savings, gifts, grants, loans from retirement accounts and seller contributions.