10 Facts About FHA Loans You Might Not Know

The FHA loan is very popular among first time buyers. The loan is easier to obtain because credit requirements are lower. Additionally, if might often come with a lower interest rate. However, the FHA loan may not be for everyone. Get the facts about FHA loans to determine if the product is best for you.

Fact #1:

The FHA loan is a government loan. It is a mortgage insured or backed by the Federal Housing Administration.

Fact #2:

Borrowers of the FHA loan are required to pay for mortgage insurance. This insurance protects the lender from loss in the event the borrower defaults.

Fact #3:

Mortgage insurance exists for the life of the loan. With a 3.5% down payment, monthly mortgage insurance is 0.85% of the loan. There is also a one-time upfront mortgage insurance payment of 1.75% of the loan.

Fact #4:

The minimum down payment for an FHA loan is 3.5% and the minimum FICO score is 580. Debt to income cannot exceed 43%.

Fact #5:

The FHA loan comes with a stricter appraisal process. If certain requirements are not met, the loan will not be approved. Additionally, a FHA appraisal follows a house.

Fact #6:

99% of condominiums are NOT eligible for a FHA loan. If a condominium does qualify for a FHA loan, a minimum down payment of 10% is needed to get the condominium approved through underwriting. For a list of FHA approved condominiums in your market area, visit the HUD database.

Fact #7:

You can borrow up to $331,200 in Harris County with a FHA loan. The amount can vary in other areas of the state or country.

Fact #8:

Non-occupant co-borrowers are permitted.

Fact #9:

A borrower does not have to be a first time buyer to be eligible for the FHA loan.

Fact #10:

The total package matters. A low credit score will need to be balanced with a larger down payment or better income.

Do you have questions about your mortgage options? Are you ready to buy a home? Ask your questions in the comments below, or reach out to me directly at 832-513-9931.