An FHA Loan is a government back loan insured through the Federal Housing Administration (FHA). FHA does not lend the money but it does insure the mortgage. The insurance protects the lender should the borrower default on their loan. Please note that FHA’s Monthly Insurance Premiums (MIP) that the borrower pays each month may be payable for the full term of the mortgage.
General FHA Mortgage guidelines
- More lenient credit underwriting guidelines: i.e. lower qualifying credit score requirements, less seasoning requirements for bankruptcies and foreclosures, no minimum trade line requirements.
- Small down payment: minimum 3.5% Down payment required, may use gifts and or down payment assistance grants.
- Interest rates may be lower for people with less than perfect credit unlike no-government loans.
- Mortgages are assumable
- Condos must be FHA approved
- Applicable for 1-4 units, minimum down payment for 2 to 4 unit is still 3.5%
- More liberal debt ratio requirements
- Primary residence ONLY
- Do not have to be a first time home buyer