FHA loans explained for beginners
Frequently Asked Questions
Straight answers to the questions we hear most.
An FHA loan is a mortgage insured by the Federal Housing Administration.
Who it’s for: It is designed for low-to-moderate income borrowers, first-time homebuyers, and those with less-than-perfect credit.
Key Features: It allows for a lower down payment (as low as 3.5%) and is more flexible with credit score and debt-to-income (DTI) ratio requirements compared to conventional loans.
Who it’s for: It is designed for low-to-moderate income borrowers, first-time homebuyers, and those with less-than-perfect credit.
Key Features: It allows for a lower down payment (as low as 3.5%) and is more flexible with credit score and debt-to-income (DTI) ratio requirements compared to conventional loans.
No. Loans backed by the Federal Housing Administration (FHA) have Mortgage Insurance Premiums (MIP), which have different, often more stringent, rules. For most FHA loans, MIP is for the life of the loan if you put down less than 10%. To remove it, you typically need to refinance into a conventional loan.
While FHA loans are accessible, they have some drawbacks:
Lifetime Mortgage Insurance: The annual MIP typically lasts for the entire loan term if your down payment is less than 10%.
Loan Limits: You cannot borrow more than the FHA limit for your county.
Property Standards: The home must meet stricter FHA minimum property standards.
Lifetime Mortgage Insurance: The annual MIP typically lasts for the entire loan term if your down payment is less than 10%.
Loan Limits: You cannot borrow more than the FHA limit for your county.
Property Standards: The home must meet stricter FHA minimum property standards.
While both protect the lender, FHA Mortgage Insurance is required on all FHA loans, regardless of down payment size, and it typically lasts for the entire life of the loan if you put down less than 10%. PMI, on the other hand, is for conventional loans and can be removed once you reach 20-22% equity.
This depends entirely on your lender’s policy. Some lenders may allow multiple recasts, while others may limit you to just one over the life of the loan. You must inquire with your loan servicer about their specific rules.
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