What is FHA Mortgage Insurance?
The Federal Housing Administration (FHA) insures mortgages offered by banks, savings associations, and other financial institutions. An FHA-insured mortgage is backed by the full faith and credit of the United States government. While FHA does not make loans, it benefits the homebuyer by providing mortgage insurance which encourages financial institutions to make affordable financing available.
What are the benefits of an FHA Mortgage?
FHA offers low down payment options, eligibility with less than perfect credit, a loan at a reasonable cost, and help if there is ever trouble making the mortgage payment. Because an FHA mortgage insures the lender against loss, an FHA mortgage typically has an interest rate that is competitive with the best in your market and lower than the rates charged for subprime and other non-primemortgages.
FHA not only helps people buy a home, but helps them keep it as well. In return for protecting lenders against loss, FHA requires financial institutions to offer assistance to borrowers experiencing difficulty making mortgage payments.
What is the required down payment amount?
For an FHA mortgage, buyers need only a 3.5% down payment amount. Currently, many conventional loans may require up10 to 20% down payment.
What is the FHA loan limit?
In King, Pierce and Snohomish Counties, the 2009 FHA loan limit for a single family dwelling, townhome or condo is $567,500.
What are the elibility guidelines?
In order to be eligible for an FHA-insured mortgage, a borrower must:
- Occupy the property as the principal residence;
- Possess a valid Social Security Number;
- Have a two-year employment history;
- School and military service count towards this two-year requirement.
- Not be delinquent on any Federal debt such as a student loan or other FHA-insured mortgage; and
- Meet flexible credit requirements.
Other benefits of an FHA Mortgage:
- A minimum credit score is not required. In fact, one may not be turned down for an FHA mortgage solely for lack of credit history.
- The buyer’s entire cash investment—as little as three-and-a-half percent—can be a gift from a family member, employer, charitable organization or local government entity.
- The seller can contribute up to six percent of the home’s price toward closing costs through a seller’s concession.
- There are no prepayment penalties on FHA-insured mortgages.
- U.S. citizenship is not required but, for those who are not citizens, they must be lawful permanent or non-permanent resident aliens with a valid Social Security Number.
For more in-depth information, please Contact Us and we’ll be happy to answer your questions.