Federal Housing Administration (FHA) loans are mortgages that are backed by the government. FHA loans are restricted by the U.S Department of Housing & Urban Development meaning they make the rules. Although FHA loans are backed by the government, your funds would go to the lender if you were to get an FHA loan.
FHA loans were created to help low-income families become homeowners. They offer more flexible requirements like if you've had a foreclosure, filed for bankruptcy, and have a low credit score, you could still be approved for the loan.
FHA loans aren't just for single-family homes. If you are thinking about financing a condo, 2, 3, or 4-family home, FHA loans can be an option to help you finance.
The maximum loan amount on FHA loans offered to families is different every year. In 2022, the maximum loan amount offered is $420,680. Some parts of the U.S may offer a higher maximum amount, but most of the United States has a maximum loan amount of $420,680.
If you like to know the maximum loan amount offered in your state and county, you can find out here.
Pros
- FHA loans can also be great for 1st time home buyers and recurring home buyers
- It was created to help low-income families become homeowners.
- FHA loans have more flexible requirements like you can qualify with a lower credit score (500).
Cons
- FHA loans require the borrower's home its primary residence.
- If approved, borrowers will be required to do an upfront cost of Mortgage Insurance Premium (MIP). Typically, the cost will be 1.75% of the loan amount. Psst... You have the option to roll that cost into the financed loan amount.
- It may be hard to convince a seller to take your offer if you have an FHA loan because FHA loans have stricter standards for the seller for property upkeep.
Who is this ideal for? This loan is ideal for borrowers who don't have great credit or don't have enough money to put towards a down payment. If you're interested in learning more about FHA vs. Conventional loans. Check it out here >
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