What is an FHA loan?

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration (FHA). It is designed to help first-time buyers and those with lower credit scores qualify for homeownership with low down payments and flexible credit requirements.

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Who is eligible for an FHA loan?

FHA loans are available to:

• First-time and repeat homebuyers
• Borrowers with lower credit scores (as low as 500-580)
• Those with higher debt-to-income ratios than conventional loans allow
• Buyers with limited savings for a large down payment

FHA loans are great for buyers who need a more flexible approval process compared to conventional loans.

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What are the benefits of an FHA loan?

• Low Down Payment – As little as 3.5% down with a 580+ credit score
• Lenient Credit Requirements – Scores as low as 500 may qualify (with 10% down)
• Higher Debt-to-Income (DTI) Ratios Allowed
• More Flexible Underwriting – Manual underwriting is available for lower scores
• Assumable Loan Option – Future buyers can take over your FHA loan and rate

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FHA Loan Requirements

What credit score is needed for an FHA loan?

• 580+ Credit Score – Eligible for 3.5% down payment
• 500-579 Credit Score – Requires 10% down payment

Lenders may have their own additional requirements, but we offer manual underwriting for lower credit scores.

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How much down payment is required for an FHA loan?

• 3.5% down with a credit score of 580 or higher
• 10% down with a credit score between 500-579
• Gifted funds allowed – Down payment can be gifted from family, employers, or grants

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What is FHA mortgage insurance (MIP), and when is it required?

FHA loans require mortgage insurance (MIP) to protect the lender. It includes:

• Upfront MIP (UFMIP): 1.75% of the loan amount, paid at closing (can be rolled into the loan)
• Annual MIP: 0.15% – .75% of the loan amount, paid monthly (pending loan amount and term)

Unlike conventional PMI, FHA mortgage insurance stays for the life of the loan unless you refinance to a conventional loan with 20% equity.

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FHA Loan Process

What documents are needed for an FHA mortgage?

To apply, you’ll typically need:

• Proof of income (pay stubs, W-2s, or tax returns)
• Credit report and score check
• Bank statements and asset verification
• Employment history
• Debt-to-income ratio assessment

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How long does it take to close?

FHA loans typically close within 30-45 days, but a well-prepared borrower can close faster.

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Loan Limits & Interest Rates

What are the current FHA loan limits?

For 2024, FHA loan limits vary by location:

• Low-Cost Areas: $498,257
• High-Cost Areas: Up to $1,149,825

Loan limits adjust annually based on housing market trends.

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How are FHA interest rates determined?

FHA mortgage rates depend on:

• Market conditions (Federal Reserve policy, bond yields)
• Your credit score (Higher scores = lower rates)
• Down payment amount (More down = better terms)
• Loan term (Shorter terms = lower rates)
• Debt-to-income ratio

FHA loans typically offer lower interest rates than conventional loans, but mortgage insurance affects overall costs.

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FHA Loan Programs

What is the difference between an FHA loan and a conventional loan?

FHA Loan

• Lower credit score requirements
• 3.5% down payment (vs. 5-20% for conventional)
• Requires mortgage insurance for life of loan
• More lenient on high DTI ratios

Conventional Loan

• Higher credit score required (usually 620+)
• No PMI with 20% down
• More flexible for investment properties
• Higher loan limits than FHA

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Are there special FHA loan programs for buyers?

Yes! FHA offers specialized loan programs:

• FHA 203(k) Loan – Allows homebuyers to finance renovations into their mortgage
• FHA Streamline Refinance – Simplified refinancing for lower rates without an appraisal
• FHA Energy Efficient Mortgage (EEM) – Allows financing for energy-efficient upgrades

These programs help buyers with unique financing needs beyond a standard home purchase.