FHA Home Loans

An FHA refinance mortgage or FHA loan allows for the refinance or purchase of a home with a low down payment. These loans are great for the first-time homebuyer.

The Federal Housing Administration (FHA) runs several programs to promote home ownership. In most cases, FHA loans are mortgages obtained with the help of the FHA. With a small down payment, buyers can purchase a home. FHA loans make it easier for people to qualify for a mortgage, but they’re not for everybody.

What is an FHA Loan?

An FHA loan is a loan insured against default by the FHA. In other words, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults – the FHA will pay. Because of this guarantee, lenders are willing to make large mortgage loans.

Who Can Get an FHA Loan?

Almost anybody can get an FHA loan. There are no income limits – like you may find with first time homebuyer programs. However, there are limits on how much you can borrow. In general, you’re limited to relatively small mortgage loans relative to home prices in your area. To find your limits give us a call, (775) 200-0605.

To qualify for an FHA loan, you’ll need to have reasonable debt to income ratios. In general, you have to be better than 29/41, but some programs allow up to 55%. In addition, you have to have decent credit. You don’t need wonderful credit to get an FHA loan; it just needs to be decent.

Why are FHA Loans so Great?

1. FHA loans allow people to buy a home with a down payment as small as 3.5%.
2. Easier to use gifts for down payments and closing costs
3. No prepayment penalty (a big plus for sub prime borrowers)
4. An FHA loan may be assumable
5. Possible leniency during financial hard times
6. Funding for home improvement (through FHA203k programs)

How does FHA Loans Work?

The FHA promises to pay lenders if a borrower defaults on an FHA loan. To fund this obligation, the FHA charges borrowers a fee. Homebuyers who use FHA loans pay an upfront mortgage insurance premium (MIP) of 1%. They also pay a modest ongoing fee with each monthly payment.

If a borrower defaults on an FHA loan, the FHA uses collected insurance premiums to pay off the mortgage.