FHA Mortgage

The Federal Housing Administration, or FHA for short, is a federal agency of the United States Government established in 1934 to stabilize the U.S. mortgage market, improve housing conditions and standards, and provide an adequate home financing system. It accomplishes this by providing mortgage insurance on loans made through its approved lenders and setting standards for underwriting and construction.

FHA loans for are best for borrowers who are looking for a minimal down payment and who may have trouble getting approved elsewhere. Further, it will be important that the house they want to buy, falls within the mortgage limits.

The FHA provides mortgage insurance to their approved lenders so that if a borrower defaults on their loan, the lender is reimbursed. The FHA does not directly offer loans. Borrowers will have to pay a one-time upfront mortgage insurance premium (MIP) that is rolled into the loan and an annual MIP that is divided by twelve and included in their monthly payments. The premiums go into a fund that repays lenders if borrowers default. Mortgage insurance is required for the full length of FHA loans.

Basic qualification requirements for an FHA loan Applicants must: 1: Have a social security number (SSN) Be of the minimum age to enter into a mortgage Meet income requirements Show two years of work history and income that will continue for the first three years of the mortgage Have qualifying debt-to-income and mortgage payment-to-income ratios (varies based on credit score and compensating factors) Hold a minimum credit score of 500 for the 10% down payment and 580 for 3.5% down payment (although many lenders require at least a 620) Must be creditworthy (i.e., no recent bankruptcies, liens, unresolved delinquencies or collection accounts, recent foreclosures, etc.) Have mortgage insurance Take the title in their own name or in the name of a living trust Live in the property as their primary residence within two months and for one year (exceptions do exist) Have no delinquent tax or non-tax federal debt Additionally, the home must meet the “Property Acceptability Criteria,” and the loan must be under the FHA maximum limit for their area

Yes, just like any mortgage, an FHA loan can be refinanced. Further, the FHA offers a streamlined program that makes refinancing quite simple.

Many factors can influence the closing time of a loan. However, according to Ellie Mae, FHA loan closing times average around 50 days