What is an FHA Loan?
An FHA home loan is insured by the U.S. Federal Housing Administration and financed through FHA approved lenders. FHA loans are designed to expand homeownership opportunities by allowing individuals the ability to purchase a home without making a large down payment. A popular choice for first-time home buyers, the program allows borrowers to make down payments as low as 3.5%, making these loans more flexible and attainable. Learn about FHA county loan limits.
FHA Loan Benefits
As compared to conventional loans, FHA loans generally have smaller down-payment requirements and more flexible underwriting standards. As a result, an FHA loan may help individuals with less than perfect credit and less cash on hand qualify for a mortgage or refinance. Here are some of the details of an FHA loan and an FHA Streamline refinance:
- Low down payment starting at 3.5% of purchase price
- Minimum credit score of 500
- Low Mortgage Insurance Premium (MIP)—upfront 1.75% of the loan amount, annual premium between .45% and 1.05%
- Fixed rates available in 15- 30-year terms
- 100% financing of appraised value
- Down payment money can be gifted by family
- No appraisal or out-of-pocket closing costs for refinance
FHA Loan Eligibility
To qualify for an FHA loan and FHA Streamline refinance you need to:
- Be a U.S. citizen with a valid social security number.
- Have a steady employment history or worked at the same job for the past two years.
- Use the loan to purchase, build or refinance a primary residence.
- Ensure total debt does not exceed 43% of your income.
- Currently have an FHA loan and good payment history for an FHA refinance.
- Check if your home has lost value or is underwater as you still may be eligible for a refinance.
- Show a benefit for the refinance such as a rate reduction or lower term.
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