The Federal Housing Administration, generally known as FHA, provides mortgage insurance on loans made by FHA-Approved lenders. The FHA does not make home loans; they insure the FHA loans that we can assist in getting you. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans.
FHA loan differs from the Conventional loan in the following areas:
- Income - FHA loans allow additional non-owner occupying co-borrowers to be on the application to assist the buyers in qualifying for the loan.
- Assets - Do not have to come from the borrowers own funds. These funds can be a gift from a family member.
- Equity - FHA loans can be as high as 97% of the purchase price and 95% for refinancing, both have no additional cost to the borrowers.
- Credit - Poor credit history in the past or not having any credit scores will not prohibit a potential borrower from getting an FHA loan. Each file is manually underwritten. FHA underwriters look at many other factors outside of just credit.
- Seller Concessions - Sellers are able to contribute up to 6 percent of the mortgage amount up to a maximum loan amount of 103% of the purchase price.
- Assume-ability - FHA loans can be assumed by another borrower as long as they meet the FHA lending requirements. This is a great asset when current interest rates are higher than the rate on the seller's assumable mortgage note.