What is FHA?
The Federal Housing Administration, generally known as “FHA“, provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. FHA insures mortgages on single family homes including condos and manufactured homes as well as multifamily properties.
Why choose an FHA loan?
FHA loans are federally backed mortgages designed for low-to-moderate-income borrowers who may have lower than average credit scores. FHA loans require a lower minimum down payments and credit scores than many conventional loans.
As of 2020, you can borrow up to 96.5% of the value of a home with an FHA loan. In other words, you’ll need to make a down payment of only 3.5%. Your down payment can come from savings, a financial gift from a family member or a grant for down-payment assistance. You’ll generally need a credit score of at least 580 to qualify. Certain restrictions and loan limits apply.
How Does an FHA loan Work?
The Federal Housing Administration doesn’t actually lend you money for a mortgage. Instead, you get a loan from an FHA-approved lender and the FHA guarantees the loan. Some people refer to it as an FHA insured loan, for that reason.