An FHA loan is a mortgage that is backed by the Federal Housing Administration. The program was designed to help those with poor credit or other financial overcome these to purchase homes with a lower down payment and more flexible income requirements than a traditional mortgage.
Types of FHA Loans:
Because the FHA backs the loans, it means that if you default on the loan, the federal government guarantees to the lender that they will answer for the loan. There are several forms of FHA loans.
- The most popular is the Basic Home Mortgage Loan. This allows a down payment as low as 3.5%, which is a marked reduction from the usual 20%.
- There is also the Home Equity Conversion Mortgage. This is a reverse mortgage that allows senior citizens to convert their home equity into cash. Only people aged 62 or over can qualify, and their home has to meet FHA property standards. Mortgage insurance protection is also non-negotiable for this loan.
- The 203(k) Rehabilitation Mortgage allows homebuyers to add funds to their mortgage loan for home repairs and upgrades. The improvements have to be approved by the FHA, but they can even include reconstruction if the original foundation remains in place.
- Title I Home Improvement Loans insure loans to make repairs and upgrades. The maximum amount will vary depending on whether it is unsecured or secured with a mortgage or deed. Single-family and manufactured homes are eligible.
- Energy-Efficient Mortgages are designed to help homeowners finance home improvements to reduce their energy costs by making their homes more energy-efficient. The improvements could include weatherization, insulation, upgrading HVAC systems or installing solar or wind-powered systems.
- Streamline Loans allow homeowners to refinance their existing FHA mortgage. They are named because it requires less documentation and fewer underwriting guidelines thus streamlining the process. To qualify, you need to go through an FHA approved lender like The Home Loan Expert.
- The 203(h) Disaster Victims Mortgage is designed to insure mortgages for people who live in presidentially designated disaster zones. Successful borrowers are eligible for 100% of the financing with no down payment required. The funds can be used to reconstruct a home that has been damaged or destroyed, or it can be used for the purchase of a new home.
How to Qualify?
The loans themselves have slightly different requirements, but often there are a few eligibility requirements that are overreaching. Borrowers would need a minimum credit score of 500, a steady income, a valid social security number, their home must be their primary residence for at least a year; and the home must meet FHA safety guidelines.
The FHA programs can provide options and opportunities that people would not otherwise have access to. Do your research to see which programs you qualify for and what factors affect your eligibility.