What Is an FHA Mortgage?

Simply put, an FHA mortgage is a loan indemnified by the US Federal Housing Administration (FHA). It is most popular among first-time property buyers as it offers better down payments of 3.5%, provided that they have credit scores reaching 580 and above. As perfect as it seems, this kind of loan requires borrowers to go for the mortgage premium loans as a form of security for the lender in case the borrower backs out.

The borrower’s credit score can be between 500 to 579 if there is a down payment of 10% provided. It is important to bear in mind that a possibility of higher interest rates for borrowers with low down payments can occur during the process.

This kind of loan was created when there was an increase of foreclosures and default of properties during the 1930s, making lenders secured with adequate insurance and increasing the housing market by making such loan accessible and affordable for people with less than outstanding credit. It is also to give lenders assurance or lessen the risks whenever a borrower decides to default during the process.

FHA Loan Requirements

In order to get a home with an FHA loan for the low down payment of 3.5%, applicants should have a minimum FICO score. Aside from that, here are other requirements needed:

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  • Steady employment history
  • Valid Social Security Number
  • Property appraisal from FHA-approved appraiser
  • Front-end ratio that is lower than 31% of gross income
  • At least two years of being clear of bankruptcy and an existing good credit


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