FHA loans can qualify you for lower mortgage loan rates, especially if you have poor credit. With a government backed loan, your down payment requirements are reduced, usually to just 3%. In addition the FHA provides help with loan payments if you encounter future financial difficulties.

Who Qualifies For A FHA Loan

The FHA loan program is open to anyone wanting to purchase their primary residence. You need enough cash for closing costs, although this can be provided by a third party, like family, the seller, or grants. You also need steady income to cover your monthly mortgage payment and living expenses. Credit is also a factor in your FHA loan, but you don’t necessarily have to be in good standing. If you are concerned about your ability to qualify, ask an approved HUD lender.

FHA loan benefits:

• Only requires a 3% down payment
• Ability to finance closing costs
• FHA has set limits on the amount lenders can charge for some closing cost fees (e.g. origination no more than 1% of mortgage).
• Maximum mortgage amount can vary significantly by area. FHA adjusts this amount periodically based on certain economic variables. You should check with your local FHA office or approved lender to determine your maximum mortgage amount.
• Under certain conditions, automatic cancellation of the FHA mortgage insurance premium

• Fannie Mae - Nickname for Federal National Mortgage Association (FNMA).
• Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) - A quasi-governmental, federally-sponsored organization that acts as a secondary market investor to buy and sell mortgage loans. FHLMC sets many of the guidelines for conventional mortgage loans, as does FNMA.
• Federal Housing Administration (FHA) - An agency within the Department of Housing and Urban Development that sets underwriting standards and insures residential mortgage loans made by private lenders. One of FHA's objectives is to help make affordable mortgages available to homeowners with low or moderate income. FHA loans may be high loan-to-value, and they are limited by loan amount. FHA mortgage insurance requires a fee of 1.5 percent of the loan amount to be paid at closing, as well as an annual fee of 0.5 percent of the loan amount added to each monthly payment.
• Federal National Mortgage Association (FNMA or Fannie Mae) - A private corporation that acts as a secondary market investor to buy and sell mortgage loans. FNMA sets many of the guidelines for conventional mortgage loans, as does FHLMC. The major purpose of this organization is to make mortgage money more affordable and more available.