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Frequently Asked Questions About FHA Loans

Frequently Asked Questions About FHA Loans

Want to purchase a home but you don’t have a stellar credit history or enough money for a substantial down payment? The FHA Loan program provides an amazing opportunity for aspiring homeowners!

Not familiar with it? Below, we answer some questions that most people have about FHA loans. 

 

FAQs About FHA Loans

What is an FHA Loan? How much can I borrow? How can I get an FHA loan? Below, we answer some of your FHA loan-related questions. 

 

What is an FHA Loan?

A Federal Housing Administration (FHA) loan is a type of mortgage that’s insured by the Federal Housing Administration. Permitting down payments as low as 3.5% with a 580 FICO, FHA loans are beneficial for buyers with lower credit scores or limited savings.  

 

Is the FHA my lender?

No, the FHA itself is NOT your lender. FHA loans are made through FHA-approved private lenders. 

The FHA insures mortgages issued by lenders, such as credit unions, banks, and nonbanks. That insurance protects lenders in case the borrower defaults, which is why FHA lenders are willing to offer valuable terms to borrowers who might not otherwise qualify for a home loan. 

ONLY an FHA-approved creditor can provide an FHA loan.

 

What are the requirements for an FHA loan?

There are a number of requirements that you have to meet in order to secure an FHA loan:

  • A FICO® score at least 580 = 3.5% down payment
  • A FICO® score between 500 and 579 = 10% down payment
  • MIP (Mortgage Insurance Premium) 
  • A maximum debt-to-income ratio of 43%
  • Proof of employment and stable income 
  • The home must be the borrower’s main residence

Note: These are the FHA’s minimum requirements – lenders may have additional conditions.

 

How much can I borrow?

The maximum amount that you can borrow through an FHA loan varies on where you live and what type of property you want to buy.

To check the loan limit for your county, visit: https://entp.hud.gov/idapp/html/hicostlook.cfm.  The maximum loan amount on single-unit properties ranges from $314,827 (low-cost areas) to $727,525 (high-cost areas). For 4-unit properties, the maximum amount you can loan ranges from $605,525 to $1,397,400.

 

Are there different types of FHA loans? What are they?

Yes, there are different types of FHA loans, including:

  • Fixed-Rate Mortgage
  • Adjustable-Rate Mortgage
  • Home Equity Conversion Mortgage (HECM) 
  • Section 245(a) — Growing Equity Mortgage or Graduated Payment Mortgage
  • Energy Efficient Mortgage (EEM) Program (finances home improvements to boost your home’s energy efficiency)

 

How long do FHA loans take to close?

On average, it takes about 47 days to close an FHA mortgage loan. Generally, FHA loans close in a similar timeframe to conventional loans but may need additional time at specific points throughout the process. 

 

Start Your FHA Loan Application

Applying for an FHA loan is fairly straightforward. Once you’ve chosen the lender you want to apply with, their loan officers will walk you through the process step-by-step. Just make sure you’ve got all your financial documents and other requirements on hand to make the application process go as smoothly as possible. Good luck! 

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