FHA loan refers to a mortgage loan insured by the Federal Housing Administration (FHA), which is a government agency within the U.S. Department of Housing and Urban Development (HUD). FHA loans are designed to make homeownership more accessible, particularly for first-time homebuyers or individuals with lower credit scores and a smaller down payment.
Here are some key features of FHA loans:
Lower down payment
FHA loans typically require a down payment as low as 3.5% of the purchase price. This is significantly lower than the 10-20% down payment often required for conventional loans.
FHA loans require borrowers to pay an upfront mortgage insurance premium (MIP) at closing, as well as an annual MIP that is included in the monthly mortgage payment. This insurance protects the lender in case of default.
Flexible credit requirements
FHA loans are more lenient when it comes to credit scores compared to conventional loans. Borrowers with credit scores as low as 580 may qualify, although a higher score may be required by some lenders.
Limits on loan amounts
FHA loans have loan limits set by the FHA, which vary depending on the county and housing market. These limits may change annually.
FHA loans are assumable, meaning that if you decide to sell your home, the buyer may be able to take over your FHA loan, potentially providing an attractive feature to potential buyers.
It's important to note that FHA loans are only available through FHA-approved lenders such as Castle Rock Mortgage, LLC. If you're considering an FHA loan, it's advisable to consult with one of our experienced mortgage professionals who can guide you through the process and provide personalized advice based on your specific circumstances.