What is an FHA Loan?
As you begin shopping for your new home, you may hear about FHA mortgages as an alternative option to conventional loans and wonder how it's different. FHA loans are home loans that are backed by the United States Federal Housing Administration (FHA) that are designed to help low-to-moderate income people and people without ample savings become homeowners. The down payment requirements are lower than with many conventional mortgages, and you can typically qualify with a lower credit score that most conventional lenders would accept.
Here are some frequently asked questions about FHA loans so you can get a sense of whether this type of home loan is right for you.
Do I need to be a first-time home-buyer to get an FHA loan?
No, you do not need to a be first-time home buyer. You simply need to be purchasing a home you will live in as a primary residence.
Do I need to be lower-income to qualify?
No, you do not need to be lower-income to qualify for an FHA loan. People of all income levels are eligible to apply for an FHA loan. You simply need to meet the down payment and credit score requirements, which are less stringent than most conventional loans.
What sort of down payment is required for an FHA loan?
The typical requirement for a down payment for an FHA loan is 3.5% to 5%. By contrast, most conventional lenders will require a 10% or 20% down payment.
Can I use down payment assistance and/or gifts to cover the down payment?
Yes, you can use down payment assistance and gifts to cover some or all of the down payment. By contrast, conventional loans may require that you use your own money for at least 10% of the down payment.
You do not need to be lower income to qualify for an FHA loan. People of all income levels are eligible to apply for an FHA loan.
Do I have to pay mortgage insurance on an FHA loan?
Private mortgage insurance (PMI) is a type of insurance borrowers typically pay on a loan when they have less than a 20% down payment. You are no longer responsible for paying for PMI once you have 20% equity in the home.
If you get an FHA mortgage, you won't pay for traditional PMI. However, you will need to pay for government-issued mortgage insurance.
Can I use it for multi-family properties?
Yes, you can use an FHA loan to buy a multi-family property, provided that the property has no more than four units and you will live in one of them as your primary residence.
Why haven't I heard of FHA loans before?
In order for a bank or other lender to offer FHA loans, they must be approved to do so by the federal government. If you've approached a lender in the past and they did not mention this loan to you, don't assume it's because you wouldn't qualify. It may simply be that particular bank wasn't approved to make this type of loan. Instead, reach out to a bank that's approved to issue FHA loans if you're interested in this type of loan.
If you're ready to start shopping for your new home with the help of a FHA loan, get in touch with a Synovus mortgage specialist today. We're here to help you get the financing you need to purchase your next home.
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This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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