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Facts About FHA Loans

October 12, 2009 | Loans | No Comments

Back in the days of no-money-down lending most people bypassed using a government-insured Federal Housing Authority (FHA) loan, which allows borrowers to purchase a home for as little as 3.5% down payment.  

With today’s real estate market, FHAs are the only alternative for buyers who cannot afford the minimum down payment of 10% that many banks now require for a conventional loan.

According to a survey, about one-third of buyers have 10% or less saved for a down payment.  As a result, FHA loans have increased dramically from 3% to 25% of the loan market.

Below are some facts about FHA loans:

  • FHA loans are not only for low-income borrowers.  There is no cap on what a borrower earns.
  • The max loan is $271,050 in areas where real estate is cheap, $729,750 in expensive markets such as California and New York.
  • Thorough appraisals are required for FHA loans by the government.  Sellers must fix all issues before a buyer can close on a FHA loan.
  • Nominal interest rates for FHA mortgages are comparable to conventional loans; however, there is a 1.75% upfront charge and a 0.5% annual insurance premium for 5 years and until the principal balance hits 78% of the sales price or the home’s appraised value.
  • FHA mortgages now only takes a few days longer that conventional loans to close.
  • FHA loans require written documentation of income which includes pay stubs and tax returns.





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