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The FHA Loan

FHA loan is a type of mortgage insurance provided by the Federal Housing Administration (FHA), which offers to pay off the loan is the borrower defaults. Since 1935 FHA loans have made it easier for people who have a less than favorable credit rating or debt to income ratio obtain a loan. As a division of the US Housing and Urban development (HUD), a FHA loan stabilizes the mortgage market while improving housing standards.

Benefits of a FHA Loan:
  • Closing costs can be included in the loan
  • The ability to add home repair cost for remodeling to the loan 203k
  • Down payments as low as 3.5%

Additional Information
An upfront mortgage insurance premium (UFMIP) equal to 1.75 percent of the base loan amount at closing is required. This amount is normally financed into the total loan amount by the lender and would be used to reimburse the lender should the borrower default on the loan and the lender forecloses. In addition, there is also a monthly mortgage insurance premium (MIP) which varies based on the amortization term and loan-to-value ratio. Minimum credit score requirements may apply.