The Federal Housing Administration offers a series of loan programs geared toward flexibility for the borrower. These programs called FHA loans allow you to purchase or refinance primary residences. The programs presently require a minimum downpayment of 3.5% of the sales price. So a consumer can obtain a loan for as little as 3.5% contribution and that money can come from many places. The two most common, however, are from your own savings or from the gift of a relative. There are a very few instances where a gift from some one other than a blood relative might be allowed.
These loans, offered as a fixed rate or as an Adjustable Rate Mortgage (A.R.M.) generally allow some credit blemishes and will often allow for a co-signer when the primary applicant can not meet the FHA requirements by themselves.
There are many reasons a homeowner would choose an FHA loan option. FHA has flexible credit guidelines that OFTEN allow loans for borrowers with les than perfect credit. FHA is also more flexible regarding debt ratios, often allowing that percentage of income that goes to debts (DTI) to go as high as 49.5%. So whether you have past credit issues, higher debt ratios, or less cash for closing, FHA may give you options you can not find elsewhere.
FHA requires an up front fee (called an UFMIP), which is at present 1.75% of the loan amount. They will, however, allow this fee to be added to the loan balance. FHA also requires monthly mortgage insurance. FHA loans do have maximum Loan limits based upon the state and county of the property. Click HERE for a link to that list.
FHA also offers some unique programs for rehab, renovation, and even down-payment assistance. Not every lender offers every FHA product so ask us more about these unique opportunities.