What is an FHA Loan?
An FHA Loan is a mortgage insured by the Federal Housing Administration. Overseen by the Administration of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. FHA loans do not come directly from the FHA, they insure these loans.
FHA Fun Facts
- Sellers can contribute up to 6% in closing costs and prepaid expenses
- Available for 1-4 unit properties
- The FHA is not the lender, only the insurer to an FHA-approved lender.
- Need some rehab (nonstructural) done before you move in? There is also an FHA 203k loan. Let us know if you want to learn more.
- Maximum Loan amount in St. John’s, Duval, and Clay County: $330,050.
- Occupancy type: Primary Only
FHA Money Facts
- Min. Credit Score: 580
- Debt to Income Ratio: Typically 43%
- Gift Funds: Allowed
- Seller Concessions: Up to 6%
- Any foreclosure action against you must be 3 years old or more
- You must have 36 months of good credit after the foreclosure action against you
- You must have 36 months of stable income
- Any bankruptcy action taken by you must be 24 months or older
- You must have a record of paying your bills 24 months after the bankruptcy proceeding
- min. 3.5% down payment (FICO credit score > 580)
- min. 10% down payment (FICO credit score 500-579)
- FICO credit scores < 500 are generally ineligible for FHA loans
Mortgage Insurance Premiums Explained (there are 2 of them) [source: www.portal.hud.gov]
- First Premium: The Upfront Mortgage Insurance Premium (UFMIP) note: this is a one time premium that can be financed into your loan
- 1.75% of Base Loan Amount (ex. $100,000 = $1750)
- Second Premium: Annual Mortgage Insurance Premium (MIP)
- .85% for down payments less than 5% [ex. $100,000 = $850]
- .80% for down payments greater 5% [ex. $100,000 = $800]
- Although this an annual premium, it’s paid monthly with your monthly mortgage payment
- NOTE: THE MORTGAGE INSURANCE PREMIUM WILL REMAIN THROUGH THE LIFETIME OF THE LOAN