Benefits and Features

• Down payment options as low as 3.5% 
• Allows gift funds to be used for down payment
• Allows home sellers to contribute up to 6% of borrower's closing costs
• Allows broader range of income, debt, and credit history than conventional mortgages
• Loans for 1- to 4-unit properties, townhouses and condominiums, and manufactured homes
• Access to streamlined refinance programs
• Required to pay mortgage insurance 
• Only available to purchase or refinance a primary residence 

Who Should Use an FHA Loan?

FHA loans are a government-backed program designed to assist a broad range of people in achieving homeownership. Borrowers who have less-than-optimal credit or limited funds available for a down payment might consider an FHA Loan. They must be able to make a down payment of at least 3.5%, must live in the property they are purchasing, and have an acceptable debt-to-income ratio (depending on credit history). FHA borrowers generally need to have good credit, but even borrowers who have negative things in their earlier credit history may be eligible if they have demonstrated financial responsibility in recent years.

Understanding FHA Mortgage Insurance 

FHA loans require the payment of mortgage insurance. There are two parts of FHA's mortgage insurance: a one-time upfront mortgage insurance premium (UFMIP) paid at closing, and annual mortgage insurance premiums (MIP). The UFMIP is 1.75% of the purchase price of the home, and can sometimes be rolled into the total loan amount. The MIP is typically between 0.15% and 0.75% of the loan amount and is broken up among your monthly mortgage payments.

If an FHA borrower chooses to refinance into a conventional mortgage later, they may be eligible to eliminate the monthly mortgage insurance requirement.

FHA Refinance Options Below