FHA Loan Mortgage Product
The Federal Housing Administration, also known as "FHA", provides mortgage insurance for loans provided by approved FHA lenders within the United States. The FHA insures mortgages on single family, multifamily homes (up to 4 units,) and manufactured homes. The Federal Housing Administration provides insurance against losses that occur when homeowners default on their mortgage.
With less to lose in the event that a homeowner defaults on their mortgage, FHA approved lenders are able to make loans that require very little cash-to-close and have less restrictive credit requirements. This allows the FHA to deliver on its mission of making home ownership a reality for most Americans. In fact, by insuring more than 34 million mortgages since it started in 1934, The Federal Housing Administration is the largest insurer of mortgages in the world.
How It Works:
Basically, FHA promises to pay the lender a certain amount of money in the event that a borrower defaults on his or her FHA loan. In order to provide this protection against default, home owners who get an FHA mortgage are required to pay an upfront mortgage insurance premium (UFMIP) and an annual mortgage insurance premium (MIP) to the Federal Housing Administration. The annual mortgage insurance premium requirement will go away after 5 years OR when the remaining balance on the loan is 78 percent of the value of the property; Whichever is longer.
Features & Benefits:
- It's easier to qualify: Those with a less-than-perfect credit history and higher debt-to-income ratios are still able to qualify for an FHA mortgage
- Buy a home with a down payment as small as 3.5%
- There are no prepayment penalties when refinancing or selling the home.
- Under certain conditions, the FHA Loan is assumable.
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