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Federal Housing Administration (FHA)

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What is an fha loan?

An FHA loan is a mortgage that is insured by the Federal Housing Administration (FHA). They usually come with a lower down payment requirement and more lenient credit restrictions. In fact, the down payment on an FHA loan can be as little as 3.5% of the purchase price of the home, and they can be taken out on properties with up to four units, allowing qualified buyers to not only own their own home, but to potentially have rental income as well. Conventional mortgages have more stringent credit requirements, and the down payment is usually 20% of the home’s purchase price.

These qualities make FHA loans good options for those with average credit scores, first-time home buyers or borrowers who are developing or recovering their credit. With the backing of the FHA, lenders are free to offer better deals than they would otherwise.

While FHA loans may have more accommodating requirements than traditional mortgages, borrowers are required to pay insurance in order to make up for the lower closing costs and more generous credit requirements.  The insurance can be paid up front or monthly. Once the borrower has paid a certain amount of the mortgage, they will no longer have to pay the premium, or they can refinance to a non-FHA loan.

Why an fha loan?

FHA loans can be used to purchase a single-family home or multi-family residence with up to four units. They are available to borrowers who have filed for bankruptcy, provided it has been discharged for at least two years. Benefits of an FHA loan include: lower down payments, lower closing costs, and easier credit qualification.

Closing costs may be lower with an FHA loan because the Federal Housing Authority allows lenders, sellers and builders to pick up certain closing costs. For example, expenses of appraisals, fees to pull credit reports and title expenses may not need to be paid out-of-pocket. 

The fact that FHA loans are insured also means that your loan servicer may be able to offer you options for potential relief if you later run into an unforeseen serious financial hardship.

Initial Mortgage and Refinance Loans

In addition to initial mortgage loans, the FHA also has mortgage refinance programs for qualified borrowers, including FHA Streamline Refinance loans. To be eligible for this type of loan, borrowers must have an existing FHA mortgage and meet other qualification requirements. 

Loan Limits for FHA Loans

The maximum amount you can borrow under an FHA loan is set by the Federal Housing Authority, and varies from state-to-state and county-to-county. In some cases, maximum loan amounts may exceed what is available through conventional financing options. 

Applying for an FHA Loan

In order to offer FHA loan options to consumers, lenders must be approved to do so by the Federal Housing Authority. Brightpath is approved to offer both FHA loans and a variety of other mortgage loan products. 

If you would like to explore FHA mortgages or other mortgage products available from Brightpath, please call us at 888-222-6003, or complete our simple form below. One of our experienced mortgage specialists will contact you.

 

 

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