About FHA Loans
FHA mortgage loans are insured by the Federal Housing Administration (FHA) and were originally designed to serve first-time buyers with less-than-perfect credit. Today, FHA loans are available to borrowers of all kinds—even homeowners looking to refinance. In general, FHA loans are more flexible in credit, income, and down payment requirements making them a secure choice for borrowers who might not qualify for conventional loans.
Why Get An FHA Loan?
The great thing about FHA loans is that they are not as susceptible to FICO scores as conventional loans, so the rates are generally lower, and the mortgage insurance, called MIP (Mortgage Insurance Premium) is the same for all borrowers regardless of credit score. Doesn’t matter if you have a 580 or 720 FICO, the MIP will be the same!
Qualifying for an FHA loan is easier as well and FHA allows higher debt ratios with compensating factors. Together with a low down payment of 3.5%, often augmented with various down payment assistance programs offered by state governments and private institutions, this is often the most economical loan available.