FHA loans are federally backed loans by the Federal Housing Administration (FHA) a division of the U.S. Department of Housing and Urban Development (HUD) unlike conventional loans. FHA loans are primarily used for single-family or multi-family homes. FHA loans can only be done by approved lenders and have strict guidelines on terms. The program was set up so Americans who do not have the proper funds to purchase a house can get the necessary money without the toxic terms other lenders will have.

FHA loans differ from conventional loans as the credit scores and down payments needed to get an FHA loan are much lower than conventional loans. Also, borrowers are taking loans for their primary residences and are expected to live in the property for at least a year. For these reasons, FHA loans are popular among first time home buyers. Apply Today!

Credit Scores For an FHA Loans

As of writing the minimum credit score needed to get an FHA loan with a 3.5% down payment is 580. Borrowers with a credit score lower than 580 can still get an FHA loan with a larger down payment.

A credit score of 500 to 579 would need to have a down payment of 10% to be approved for an FHA loan. A borrower with a credit score of less than 500 is not eligible for an FHA loan.

Mortgage Insurance Premiums For FHA Loans

A mortgage insurance premium (MIP) is required for all FHA loans regardless of the down payment amount. The mortgage insurance premium consists of two parts the upfront mortgage insurance premium (UFMIP) and the annual mortgage insurance premium. As of 2012, the upfront mortgage insurance premium is 1.75% of the loan amount. The annual mortgage insurance depends on the loan to value of the loan.

Borrowers are expected to pay the annual mortgage insurance premium for the life of the loan or until the loan to value drops below 80%. The mortgage insurance premium is automatically canceled when the loan to value reaches 78% of the original value. Note financed mortgage insurance premium can’t be canceled.

FHA Loans FAQ

FHA Loans Income Limits?

A common misconception is FHA is for low-income people only. That is simply not the case while it helps low-income people secure loans FHA loans do not have income limits so anyone regardless of income can apply.

FHA Loan Credit Score Needed?

For an FHA with 3.5% down a credit score of at least 580 is required. For an FHA with a down payment for 10%, a credit score from 500- 579 is required. A credit score below 500 is not eligible for an FHA.

To see current rates check out MortgageNewsDaily.com