FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.
Benefits of FHA financing include:
Only a 3.5% percent down payment is required for Purchases.
Finance up to 95% of the value of your home on Cash-Out Refinances.
Finance up to 97.75% of the value of your home when your Refiance is in order to obtain a lower Rate or Term.
Closing costs can be financed.
Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
More flexible underwriting criteria than conventional loans
FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
Loans are assumable to qualified buyers.
This can be a great buyer's incentive if you're locked in at a low fixed rate when you're looking to sell quickly!
An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.
