What is an FHA loan? FHA Loans are insured by the Federal Housing Administration (FHA). This means that if you default on an FHA loan, the Federal Housing Commission ensures the mortgage lender against any losses. Mortgage lenders like FHA loans. Why do consumers like FHA loans?
Since the loan is insured, the lender can offer you good terms including:
- A low down payment (as low as 3.5% of the purchase price)
- The financing of some closing costs (which means they are included in the loan amount), and
- Low closing costs.
- MIP (Mortgage Insurance Premium) must be paid as part of the FHA Loan. It is the FHA equivalent of PMI's in conventional loans.
An FHA loan is often easier to qualify for than a conventional mortgage and anyone can apply. However, FHA loans have a maximum loan limit that varies depending on the average cost of housing in a given region. If you would like to learn more about FHA loans, CLICK HERE!