FHA Loans

The Federal Housing Administration (FHA) offers government-backed mortgage programs that are designed to help individuals with low-to-moderate incomes, challenging credit profiles or limited funds obtain mortgages. The FHA insures the mortgage which guarantees that the lender will recover the full amount of the mortgage in the event of foreclosure.  The key benefit of the FHA mortgage program is that it only requires the borrower to make a down payment of 3.5% of the home purchase price. Because of the low down payment requirement, the FHA mortgage program can be an excellent option for first-time home buyers.  

Borrowers can combine an FHA loan with a personal gift, employer program, seller contribution or qualified subordinated second mortgage to pay for a down payment, closing costs or property renovations, allowing the borrower to purchase a property with no personal financial contribution. 

The main downside of an FHA mortgage is that it may cost borrowers more in total monthly housing expense as compared to a conventional loan because it requires the borrower to pay an up-front and ongoing annual FHA Mortgage Insurance Premium (MIP).