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FHA Home Loan
FHA HOME LOANS
What is a FHA Loan?
FHA was created in 1934 when Congress recognized that the housing economy was in poor shape. At the time 9 out of 10 households were renters, many loans required 50% down and other inconvenient terms, millions of constructions workers were out of work. FHA became a part of the Department of Housing and Urban Development’s (HUD) Office of Housing in 1965.
An FHA Loan is a government loan, and is backed by the Federal Housing Administration (FHA), a division of HUD and are issued by qualified lenders such as FHA the Fairway. The FHA provides mortgage insurance that protects lenders against financial loss should a homeowner default on their loan.
We at Fairway encourage you to take some time to learn more about the particular benefits that are available through the FHA Home Loan. For more information or if you would like to see if you qualify for a FHA loan, contact our experts today at (888) 301-3465.
FHA Loans vs. Other Common Loan Programs
| FHA Loans | VA Loans | Conventional Loans | USDA Loan |
|---|---|---|---|
3.5% Down PaymentFHA loans require a minimum 3.5% Down Payment on all purchases. |
0% Down PaymentEligible Borrowers are able to utilize a VA Home Loan with no money down and often little to no funds out of pocket. |
3-20% Minimum Down PaymentConventional Loans require a minimum Down payment. |
0% Down PaymentEligible Borrowers are able to utilize a USDA Home Loan on Eligible properties with no money down. |
Upfront Mortgage Insurance Premium RequiredAll FHA loans incur an Upfront Mortgage Insurance Premium of 1.75% of the loan amount which is then added to the total loan balance and is included in monthly payments. |
Funding FeeThere are several reasons a Veteran may be exempt from paying a funding fee. |
No Funding FeeRegardless of the down payment amount, Conventional loans do not require a Funding Fee. |
Guarantee Fee RequiredUSDA loans require an upfront Guarantee Fee which is then added to the total loan balance and is taken account into monthly payments. |
MMI RequiredMonthly mortgage insurance (MMI) is added to loan payments for all FHA loans. The amount varies based on down payment. |
No PMIPrivate Mortgage Insurance is not required on VA Loans due to backing by the U.S. Veterans Administration. |
PMI RequiredMonthly private mortgage insurance (PMI) is added to loan payments for borrowers paying less than 20% down in most cases. |
Annual Fee RequiredUSDA Loans require both annual upfront guarantee and an annual guarantee fee included in the monthly payments. |
Flexible GuidelinesFHA allows for some of the highest Debt to Income Ratios. It also allows unmarried and non-occupant co-borrowers, and is more lenient on adverse credit. |
Flexible GuidelinesLess Stringent GuidelinesVA loans are more flexible on employment requirements and income earnings. Offers more relaxed credit standards. Typically requires no reserves. |
Standard GuidelinesConventional loan options traditionally require lower Debt to Income ratios. They also often require reserve funds and can be much more difficult for some borrowers to qualify for. |
Strict GuidelinesUSDA's credit underwriting requirements are comparable to other agency underwriting requirements. Additionally not only do the borrowers have to qualify but the property must be in a qualified area. All properties must be qualified. |
Regulations and Fees
As a general rule the federal government does not make FHA Home Loans directly even though it is a federal program. Lenders like FHA the Fairway make these loans to the borrower and the FHA offers a guaranty to the lender.
Should the borrower default on the loan, the lender is protected. With this security, the lenders are able to offer loans with better terms and conditions than with conventional loans.
Loan Limits
Loan Limits are posted annual and vary by state and geographic areas. To find out the FHA Loan Limit in your area, please give us a call on our toll-free phone number at (888) 301-3465. You can also find loan limits online at https://entp.hud.gov/idapp/html/hicostlook.cfm
Funding Fees
There is a FHA Funding Fee associated with each FHA Home Loan. This fee goes directly to FHA to make sure that the program is able to keep running for future home buyers, thus ensuring that there will not be any additional burdens for tax payers. The upfront fee is 1.75% of the loan amount. This fee may be rolled into the borrower’s total loan amount.
Down Payment Assistance
Depending on area, income and other factors down payment assistance may be available to you. Call us today to find out more! It is not uncommon for FHA borrowers to purchase a home with little to no money due at the time of closing.
As a general rule the federal government does not make FHA Home Loans directly to borrowers even though it is a federal program. Lenders like FHA the Fairway make these loans to the consumer and the Federal Housing Administration offers a guaranty to the lender.
Should the borrower default on the loan, the lender is protected. With this security, the lenders are able to offer loans with better terms and conditions than with conventional loans.
Loan Limits
In some higher cost counties across the country the loan limit may be higher. To find out the FHA Loan Limit in your area, please give us a call on our toll-free phone number at (888) 301-3465.
Funding Fees
There is a Upfront Mortgage Insurance Premium associated with each FHA Home Loan. This fee goes directly to the US Department of Housing and Urban Development to make sure that the program is able to keep running for future home buyers, thus ensuring that there will not be any additional burdens for tax payers and veterans. If you are using your FHA Home Loan benefit, the upfront mortgage insurance premium is 1.75 percent. The annual MIP ranges from 0.45 percent to 1.05 percent based on the loan amount, LTV and term of the loan.