“FHA loans” are mortgages insured by the Federal Housing Administration (FHA), which can be issued by any FHA-approved lender in the United States.
Congress established the FHA in 1934 to help lower income borrowers obtain a mortgage that otherwise would have trouble qualifying. In 1965, the FHA became part of the Department of Housing and Urban Development’s (HUD) Office of Housing.
Before the FHA was established, it was common for homeowners to put down 50% of the value of the property as a down payment on short-term balloon mortgages, which clearly wasn’t practical going forward.
Unlike conventional loans, FHA loans are government-backed, which protects lenders against defaults, making it possible to for them to offer prospective borrowers more competitive interest rates on traditionally more risky loans.
Qualifying for an FHA Loan
Because FHA loans are insured by the government, they have easier credit qualifying guidelines than most lenders, as well as relatively low closing costs and down payment requirements.
What is the minimum down payment on an FHA loan?
With an FHA loan, your down payment can be as low as 3.5% of the purchase price, assuming you have at least a 620 credit score. And closing costs can be bundled with the loan. In other words, you don’t need much cash to close.
In fact, gift funds can be used for 100% of the borrower’s closing costs and down payment, making them a truly affordable option for an individual with little cash on hand.
If you are interested in getting Pre-Qualified for a FHA Loan please contact (973) 348-5566 or Email: HAlvarez@MucLoan.com. Contacting our representative does not commit you to any terms but allows for you to learn what you will qualify for prior to selecting a home. To get a pre-qualification the following is needed:
Before you start the FHA loan process, be prepared to provide some information to your loan officer. Have it ready now to save time later.