What is the FHA?
Published | Written 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.
Minimum Credit Score
3.5% with credit score of 580+ and 10% for credit score of 500 to 579
3% to 20%
15 or 30 years
10, 15, 20, or 30 years
Upfront MIP + Annual MIP for either 11 years or the life of the loan,
None with down payment of at least 20% or after loan is
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
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!