FHA Loan
Definition and meaning of FHA Loan in real estate.
An FHA loan is a federal mortgage program backed by the Federal Housing Administration that allows buyers to purchase homes with lower down payments and flexible credit requirements.
In more detail
These loans are popular among first-time buyers because the down payment can be as low as 3.5 percent for qualified borrowers. Because the government insures the mortgage, private lenders are willing to offer competitive terms to individuals with less-than-perfect credit. Borrowers must pay upfront and monthly mortgage insurance premiums, which increases the overall cost of the loan.
Key facts
| Category | Mortgages & Financing |
|---|---|
| Minimum down payment | Typically 3.5 percent |
| Administered by | Private lenders and backed by the Federal Housing Administration |
| Required | Upfront and annual mortgage insurance premiums |
A first-time buyer with a credit score of 620 uses this program to purchase a home with a 3.5 percent down payment instead of the larger down payment required for a conventional loan.
Frequently asked questions
Can you remove the mortgage insurance from this loan?
If you make a down payment of less than 10 percent, the monthly mortgage insurance typically remains for the life of the loan unless you refinance into a conventional loan.
Does the property have to meet specific requirements?
Yes, the property must pass an inspection to ensure it meets basic safety, security, and structural soundness standards.