Federal Housing Administration Loans

The Federal Housing Administration insures loans that allow buyers to purchase a home with very low down payments.  FHA loans are geared toward first time home buyers, but that is not a requirement.  This program currently has looser guidelines with regard to credit scores and debt-to-income ratios than those generally required for conventional loans.

Advantages

• Requires less cash upfront for your down payment and closing costs. Borrowers can purchase a home for as little as 3.5% out of pocket
• Available for all income levels
• Assumability feature allows for someone buying your home from you to take over your FHA loan with no further obligation on your part. This is a very attractive feature for buyers when interest rates are rising.
• A co-signer can help you qualify even if he or she doesn’t live in the home
• Minimum 580 credit score
• Can be used for 1-4 unit homes, primary residences only
• Very attractive interest rates, even for borrowers with low credit scores.
• Gift funds can be used for the entire down payment

Disadvantages

• Borrowers pay monthly mortgage insurance for the life of the loan
• Upfront mortgage premium is required however this is added to the mortgage principal