FHA FAQ

Here are some frequently asked questions (FAQs) about FHA (Federal Housing Administration) mortgages:

1. What is an FHA mortgage?
   • An FHA mortgage is a loan insured by the Federal Housing Administration, designed to help low- to moderate-income borrowers qualify for home loans by offering more flexible credit and down payment requirements.
2. How does an FHA loan differ from a conventional mortgage?
   • FHA loans are government-backed and typically have more lenient qualification criteria, such as lower credit score requirements and smaller down payments, compared to conventional loans.
3. What are the credit score requirements for an FHA loan?
   • Generally, you need a credit score of at least 580 to qualify for the minimum 3.5% down payment. However, if your score is between 500 and 579, you may still qualify with a 10% down payment.
4. How much down payment is required for an FHA loan?
   • The minimum down payment for an FHA loan is 3.5% of the home’s purchase price for borrowers with credit scores of 580 or higher. If your score is below 580, the minimum down payment increases to 10%.
5. What is FHA mortgage insurance, and how does it work?
   • FHA loans require mortgage insurance premiums (MIP), which protect the lender in case of default. There are two types of MIP: an upfront premium (usually 1.75% of the loan amount) paid at closing, and an annual premium (0.45% to 1.05% of the loan amount) paid monthly.
6. Can mortgage insurance be canceled on an FHA loan?
   • In most cases, mortgage insurance for FHA loans cannot be canceled and lasts for the life of the loan if the borrower puts down less than 10%. If you put down at least 10%, the MIP can be canceled after 11 years.
7. What are the maximum loan limits for FHA loans?
   • FHA loan limits vary by location and are based on local housing prices. Limits are generally higher in areas with more expensive real estate markets and lower in areas with less expensive homes.
8. What are the benefits of an FHA loan?
   • Benefits include lower down payment options, more flexible credit score requirements, and the ability to qualify with a higher debt-to-income ratio compared to conventional loans.
9. What are the disadvantages of an FHA loan?
   • Disadvantages may include the requirement to pay mortgage insurance premiums for the life of the loan (in some cases), potential for higher overall loan costs, and lower loan limits compared to conventional loans.
10. Who is eligible for an FHA loan?
    • FHA loans are available to U.S. citizens, lawful permanent residents, and non-permanent residents who meet eligibility requirements. Borrowers must also have a steady employment history, sufficient income, and be purchasing a home as their primary residence.
11. Can you use an FHA loan to buy a second home or investment property?
    • No, FHA loans are designed for primary residences only. However, you may be able to purchase a multi-family property (up to 4 units) and live in one unit while renting out the others.