FHA Mortgage loans are issued by federally qualified lenders and insured by the Federal Housing Authority, a division of the Department of Housing and Urban Development. An FHA mortgage is a smart choice if you have less than twenty percent for a down payment or equity in your property. The FHA payment will typically be lower than a standard mortgage because of how the loan is structured.
FHA loans are an attractive option for a first-time homeowner. With only a low down payment required, it makes saving up to buy a home easier. It also allows for a family member to gift or give you the down payment allowing parents to help their kids purchase a home of their own. The seller of the home can also help out by paying up to six percent of the purchase price of the home back to you at closing to help you with your costs for the closing. The FHA loan program is also generally easier to qualify for that other mortgage loans allowing for lapses in past credit or financial problems you may have experienced. A clean track record for at least 12 months would be required by FHA.
You can also refinance your home with an FHA Mortgage. The program allows you to take advantage of the lower rates without having to have a ton of equity in your home. You can also take additional cash out during a refinance transaction – usually more than what you could with a standard mortgage program.
The FHA Mortgage program also allows you to include renovations or repairs you may want to do to your home. This can be done on either a purchase or refinance loan. This is called a 203k Rehab Loan.