FHA Loans

FHA Loans

What is an FHA Loan and how to you qualify for one?

An FHA loan is a type of Mortgage that is available to home buyers that meet specific requirements.

  • Minimum credit score of 580 for 3.5% down payment and 500 for 10% down payment, though some lenders can be more strict.
  • Buyer must occupy the property as primary home for at least two years.
  • Two year employment history.
  • Must be 4 units or less.
  • Must meet physical standards. (Pass FHA Appraisal)
  • Must be a First time home buyer

So what is an FHA loan anyways or Federal Housing Administration (FHA)? It was created by congress back in the 1930's when terms were difficult for home buyers to meet. Most banks wanted up to 50% of the value as a down payment! So FHA created an insurance program to limit the private banks risk and make them feel more secure about lending with looser requirements. It works just like a regular insurance company would, they collect an insurance premium every month that gets added on to you monthly mortgage bill and with that income they can insure the loans. That way if a home owner defaults on the loan FHA will ensure payment to the bank.

Because FHA takes an added risk they also add extra precautions. They will inspect and evaluate the condition of the home you are buying which is a whole other topic that I cover to learn more about that follow this link FHA minimum property standards.

Now I know for many people this is an exiting type of loan because it opens the door to so many Americans who would typically not be able to purchase a home, but there are also downsides to using this type of loan. Make sure you ask your real estate agent if this would be the best option for you.

  • Buyer must occupy the property as primary home for at least two years.

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