The U.S. Department of Housing and Urban Development (HUD) oversees F.H.A. loans (Federal Housing Administration).
Here are the features:
- Requires at least 3.5% down. This is a great loan for first time home buyers.
- The seller can pay up to 6% of the purchase price towards buyers’ closing costs.
- The maximum loan amount for much of our region is about $345,000 but varies from county to county.
- Mortgage insurance is required: a lump sum is rolled into the loan and it is also charged on a monthly basis, .85% of the loan amount divided by 12 is the monthly amount. Mortgage insurance does not protect the borrower in anyway. It protects the lender in case of default. Mortgage insurance is required on F.H.A. loans no matter how large the down payment.
- For those interested in applying for an FHA loan, applicants are now required to have a minimum FICO score of 580 to qualify for the low down payment advantage, which is currently at around 3.5 percent.
- If your credit score is below 580, however, you aren't necessarily excluded from FHA loan eligibility. Applicants with lower credit scores will have to put down a 10 percent down payment if they want to qualify for a loan.
- So if you're planning to buy a house, and your credit score doesn'y meet the minimum, you should weigh the advantages and disadvantages of putting down a larger down payment or using those funds to tyry and improve your credit score first.
- Fixed and adjustable rate loans are available, 30 year and 15 year amortizations.
- These loans are assumable and there are no pre-payment penalties.
- There are no income limits like there are for U.S.D.A. loans.