An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. These type loans provide home buying options to those with lower credit scores, lower income, or first time home buyers.
Facts about FHA loans:
- With a credit score of 580 or higher, borrowers generally need a down payment of at least 3.5 percent.
- FHA borrowers can use their own savings for the down payment, or use a gift from a family member or a grant from a state or local government down-payment assistance program.
- The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses.
- The FHA has a special product for borrowers who need extra money to make repairs to their homes called a 203(k).
- FHA has financing for mobile homes and factory-built housing.
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