FHA
An FHA mortgage is a home loan insured by the Federal Housing Administration (FHA). It is designed to help borrowers who may not qualify for conventional loans due to lower credit scores or smaller down payments. FHA loans are issued by private lenders but backed by the government, reducing the lender's risk.
Benefits of an FHA Mortgage:
Lower Down Payment – You can put down as little as 3.5% if your credit score is at least 580. Those with lower scores (500-579) may still qualify with a 10% down payment.
Easier Credit Qualification – FHA loans have more lenient credit score requirements, making them accessible to borrowers with lower scores or limited credit history.
Competitive Interest Rates – Because the loan is insured by the FHA, lenders often offer lower interest rates compared to some conventional loans.
Higher Debt-to-Income (DTI) Ratio Allowed – FHA loans allow borrowers to have a higher DTI ratio (typically up to 57%), which can be helpful for those with existing debts.
Assumable Loan Option – If you sell your home, the buyer may be able to assume your FHA loan, potentially securing a lower interest rate.
Gift Funds Allowed for Down Payment – FHA loans allow 100% of the down payment to come from gifted funds, such as from family or assistance programs.
Streamlined Refinancing – The FHA Streamline Refinance program makes it easy for existing FHA borrowers to refinance with less paperwork and no appraisal required.