Federal Housing Administration (FHA) Loans
The FHA loan or Federal Housing Administration loan is the loan insured against default by the FHA. It implies that FHA is guaranteeing that in case if the borrower defaults then FHA will pay and a lender won’t need to write off a loan.
FHA loan is not applicable for everybody but it can be highly apt to certain borrowers. These loans allow the home buyers to purchase a home just with a nominal amount as small as 3.5%, whereas other kinds of loans may permit such a low down payment.
Who Are Eligible For FHA Loans?
Almost everybody is eligible for an FHA loan as there are no income limits. But, there are certain limits on the amount a borrower can get. That limit significantly depends on the median home prices in your area. If you want to determine the limit applicable in your area, visit HUD’s website.
If you want an FHA loan, you'll need to have the debt-to-income ratio in an optimal range. Also, it is not necessary to have perfect credit but it will be better to have a credit score of 620 or above.
Salient features of FHA or Federal Housing Administration loans:
Just 3.5% down payment required
No penalty applicable on prepayment
It is easier to use gifts for the down payment and closing costs
Get Finance for home improvement using FHA 203k programs