What Is A FHA Loan?

An FHA loan is a residential mortgage loan that is insured by the Federal Government through the Federal Housing Administration or FHA. This agency is a division of the Department of Housing and Urban Development (HUD) and it is HUD who sets all of the rules and requirements for the FHA mortgage program.

HUD requires that all FHA borrowers pay for mortgage insurance regardless of the size of your down payment. This insurance protects the lender in the event of a default by the borrower. There are two types of mortgage insurance when using a FHA mortgage, upfront MIP and monthly MIP. Upfront MIP is financed into the loan amount and monthly MIP is paid every month as part of the principal, interest, taxes and insurance (PITI) monthly payment.

Benefits of Applying for a FHA Mortgage at Commonfund Mortgage

  • Low down payment of 3.5% required but this down payment can be in the form of a gift from a family member
  • Credit score can be as low as 580 but it is important to remember that the lower the credit score the higher the interest rate will be to the borrower
  • If you do not have a credit score you can still apply with 3 verifiable alternative credit references
  • FHA mortgage is assumable, which means when you sell your house the buyer can assume the mortgage loan you have at your interest rate. This new borrower must credit qualify for the current loan
  • FHA loans are not limited to first time buyers but you must owner-occupy the home.
  • In general, FHA loans have more lenient debt-to-income ratio thresholds than conventional mortgages
  • Singlewide manufactured homes (minimum loan amount of $75,000.00) and doublewide manufactured homes are FHA financeable
  • Employment contracts are acceptable as proof of income as long as you have a paystub within 60 days of closing

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