FHA Home Loan
What is an FHA loan?
When home buyers turn to conventional mortgages with a lower down payment, they must pay private mortgage insurance (PMI) to protect the lender if the buyer can’t make payments. PMI remains on the loan until the equity reaches 20%. FHA loans require this mortgage insurance, regardless of the down payment size. Individuals should expect additional scrutiny when borrowing under the FHA program.
What does an FHA loan require?
A lender offering FHA loans will have lower credit requirements as long as the buyer can demonstrate financial responsibility. Lenders review each application and may request additional documentation. However, they often work with buyers with a short credit history or low scores to help them secure a home.
How FHA Loans Work
- Pay 3.5% as a down payment for purchasing a home, rather than the typical 20%
- Fixed-rate mortgages with 15-, 20-, 25, and 30-year terms
- 5-year adjustable-rate mortgages may be available
- You can pay off your balance at any time with no penalties