FHA Loans

Answers to common questions about FHA mortgages.

What is FHA loan vs conventional?

A conventional loan is the most common type of home loan. The requirements to qualify are more stringent than FHA as the lender will want to make sure you are a good credit risk since this type of loan is not backed by a government agency. Benefits include lower interest rate, less paperwork, easier to pass home inspection, and you can avoid paying personal mortgage insurance (PMI) if your down payment is large enough.

An FHA loan has more lenient requirements because it is insured by the Federal Housing Administration (FHA). This type of loan can be easier to qualify for with a lower credit score and has lower down payment requirements. However, FHA loans always require mortgage insurance (both an up-front mortgage insurance premium and monthly installments) and have stricter property standards. These loans are designed to help people purchase their first home but may also be a good option when refinancing a mortgage.

How do you get approved for an FHA loan?

• Have a valid SSN and be a legal resident of the US.
• Have verifiable and steady income.
• Have a debt-to-income ratio less than 50%.
• Have a minimum down payment of 3.5% (varies based on credit score). However, the money can be gifted from a family member.
• The property must be used as your primary residence.
• The property must be appraised by an FHA-approved appraiser and needs to meet certain standards.

What is the downside of an FHA loan?

• Must pay FHA mortgage insurance – both up-front as part of your closing costs and monthly as part of your monthly payment, paid for the life of the loan.
• More stringent property requirements – the house must be structurally sound and meet specific standards. If it is a fixer-upper, an FHA loan might not work.
• Must be your primary residence – FHA loans can not be used for vacation or investment properties.
• Limited loan size – the maximum loan amount is based on the property location.

*Additional lender fees:

$1395 UW/Admin ($0 for VA loans)

$775 typical appraisal fee (varies)

$0 credit report, $0 processing, $0 doc prep, $0 funding, $0 wire transfer, $0 flood certification.

Always scan the fine print for origination and/or other fees.  When getting verbal quotes from lenders who don’t post rates, request they email a screenshot of their pricing to be sure it matches their verbal quote.

Some mortgage companies quote different rates based on how you were referred to them.  Some of their rates also vary by loan officer and/or by branch.   Upwell rates are consistent regardless of source.

Disclosures, Assumptions, and APR information

Points are costs usually collected at closing for obtaining a specific rate and may be paid by the borrower or the home seller or may be split between them. Numbers appearing in brackets are credits – example ($2000).

APR=Annual Percentage Rate: A rate that reflects the actual annual cost of a loan and includes the loan interest rate, private mortgage insurance, points and some fees.

The APR includes the approximate cost of prepaid finance charges, including 10 days of prepaid interest, points associated with the rate displayed, and some third-party fees. It does not include other closing costs. Actual APRs for individual loans may differ. All loan applications are subject to credit and property approval. Sample payments shown include only principal and interest. Your interest rate will depend on specific characteristics of your transaction and your credit profile up to the time of closing. Adjustable Rate Mortgage (ARM) interest rates and payments are subject to change during the loan term. That change can increase or decrease your monthly payment. If your down payment or equity is less than 20%, mortgage insurance will be required, which will increase the monthly payment. Assumes no other loans or liens on subject property. Property and/or flood hazard insurance may be required. Maximum loan limits may apply. Additional rates and programs are available.

Hazard insurance is required, and flood insurance may be required if the property is located in a flood zone. Payments do not include amounts for property taxes and insurance premiums. Actual payments may be higher.

This rate sheet is not a credit decision or a commitment to lend and your rate will depend on various factors including your type of loan, credit profile, property value, occupancy, loan size, etc. Rates and product availability may also vary based on the State or region in which your financed property is located. Offer is subject to normal credit qualifications. Rates are subject to change. Consult your tax advisor regarding the deductibility of interest. Some restrictions may apply.