FHA Loans
The FHA loan is a popular choice for borrowers who might not qualify for conventional financing, particularly first-time buyers.
These loans are insured by the Federal Housing Administration, which encourages lenders to approve applicants with less stringent financial profiles.
Key qualification benefits include:
- A minimum down payment of only 3.5%.
- Acceptance of lower credit scores.
- Permission for a higher debt-to-income (DTI) ratio.
Due to the government insurance, FHA loans carry mandatory Mortgage Insurance (MI). This consists of a 1.75% Up-Front Premium (UFMIP) and a recurring Monthly MI. Unlike conventional PMI, this MI is non-removable unless the loan is refinanced into a conventional mortgage once the borrower has built sufficient equity.
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