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    7500 Roosevelt Way NE
    Seattle, Washington 98115
    (206) 523-0300

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    What is the FHA?

    Published 06/16/2022 | Posted by Sarah McCormick

    Buying a home for the first time can be overwhelming, especially thinking about the huge costs that come with it. However, it doesn’t have to be, there are programs available to first-time buyers that can help make the purchase more approachable.

    One of the ways that makes purchasing a home more approachable is an FHA insured loan. FHA stands for Federal Housing Administration (who insures the loans), and the loan itself is issued by an FHA-approved lender. These loans are generally associated with first-time buyers because typically, the buyer can qualify with a lower credit score and can put less money down.

    Along with the FHA loan, a buyer will also need to pay MIP (Mortgage Insurance Premiums). There is an initial MIP charge, calculated as a percentage (1.75% in 2020) of the base loan amount, which can be rolled into the loan or paid at closing. There is also a monthly PMI that is calculated based on the loan amount, length of the loan, and how much you put down. In 2020 the MIP was typically around 0.85% of the loan amount.


    FHA LOAN

    CONVENTIONAL LOAN

    Minimum Credit Score

    500

    620

    Down Payment

    3.5% with credit score of 580+ and 10% for credit score of 500 to 579

    3% to 20%

    Loan Terms

    15 or 30 years

    10, 15, 20, or 30 years

    Mortgage Insurance

    Upfront MIP + Annual MIP for either 11 years or the life of the loan,
    depending on LTV and length of loan

    None with down payment of at least 20% or after loan is
    paid down to 78% LTV
    ?

    Mortgage Insurance Premiums

    Upfront: 1.75% of the loan + Annual: 0.45% to 1.05%

    PMI: 0.5% to 1% of the loan amount per year

    Down Payment Gifts

    100% of down payment can be a gift

    Only part can be a gift if down payment is less than 20%?

    Down Payment Assistance Programs

    Yes

    No

    Source: Federal Housing Administration (FHA) Loan

    To find out if you qualify for an FHA loan, or to see if an FHA loan is a good fit for you, start a conversation with your lender to see what would be best for you. Have a question about this article? Reach out directly to Sarah Leland, or leave your question or comment below!

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