The FHA loan program is one of the most popular mortgage programs in the United States. The Federal Housing Administration (FHA) does not lend money, but insures loans made through FHA-approved lenders, which reduces their risk if the borrower defaults. This allows lenders to provide loans to borrowers who would otherwise not qualify, including those with average credit or low to middle income.
Following a great deal of defaults and foreclosures, the FHA mortgage program was put in place in the 1930s to offer mortgage lenders insurance against their risk and make home loans more affordable and accessible.
There are many reasons to consider an FHA mortgage:
The upfront MIP requires a premium of 1.75 percent of the purchase price. This will be $5,250 on a $300,000 loan.
This is charged monthly and depends on your loan-to-value ratio and terms. It can range from 0.45 percent to 1.35 percent of the purchase price. Loans with a longer term, and a loan that is less than $625,000, have the highest annual premium.
Not sure if you qualify for an FHA mortgage? The good news is standards are looser than a conventional loan.