What is an FHA Loan
A Federal Housing Administration (FHA) loan is a mortgage insured by the FHA that has been issued by an FHA-approved lender. These lenders can include banks, credit unions, and non-banks. The FHA insurance offers the lender protection in case of default and allows the lenders to offer more favorable terms for the buyer.
FHA loans are geared toward low- and moderate-income borrowers. Borrowers are able to achieve homeownership with as little as a 3.5% down payment and a credit score of 580. In some cases lower credit scores are accepted with a down payment of 10%.
The low down payment requirements and lower minimum down payments mean FHA loans are often more achievable and attractive, particularly to first-time home buyers than conventional loans.
FHA Loans are not just for first-time homebuyers. They can also be used to refinance single-family homes, including condominiums, manufactured homes, and multi-family homes up to four units. There are even FHA loans that can be used for new construction or home renovations!
FHA Loan Benefits
- Qualifying for an FHA loan is often easier than a conventional loan.
- FHA loans offer lower credit score requirements.
- Mortgage loan insurance is less expensive than a conventional loan.
- FHA loans have more flexible rules regarding down-payments gifts from family, employers, or charities.
