A FHA mortgage is a real estate secured home loan that is insured by the Federal Housing Administration.
The Federal Housing Administration is a United States Governmental Agency that was established in 1934 to stabilize, systematize and improve the U.S. housing and mortgage markets.
The Federal Housing Administration, also known as the FHA is a part of The United States Governments' Housing and Urban Developments' (HUD) Office of Housing
The Federal Housing Administration is one of the largest mortgage insurers in the world; Insuring more than forty six million mortgages since they were established.
The Mortgage Insurance provided by FHA protects mortgage lenders from loss in the event a homeowner fails to make their mortgage payments and defaults on their mortgage.
As a result of the Mortgage Insurance provided by FHA, the down payment requirement for FHA home loans has been drastically reduced from the 50% requirement in 1934 to 3.5% today.
In addition FHA has had a large role in extending mortgage terms from the 1934 three to five year duration, to 30 years today.
Today's longer term mortgages are much more affordable and consumer friendly than the mortgages that existed prior to governmental systemization.
As you can see, FHA has played a major role in making home-ownership much more attainable for the majority of Americans.
In addition to single family homes, FHA also insures multi-family properties, apartment buildings, residential care facilities, and hospitals.
The down payment requirement for a FHA loan:
In addition to the down payment requirement of a FHA mortgage of 3.5% of the sales price, all mortgage loans to include FHA loans, also have costs incurred to close or finalize the transaction. These costs are know as closing costs.
Closing Costs vary by location and jurisdiction, but in Maryland, DC & Virginia; closing costs average approximately 5% of the sales price of a home.
In total, A purchaser can expect to make a financial contribution of 8.5% of the sales price of a home in order to obtain and finalize a FHA mortgage loan transaction.
This being said, if the seller of a home decides to pay some costs on behalf of the purchaser, the purchasers out of pocket expense would be reduced to less than the 8.5% anticipated expense.
Closing Costs are comprised of:
Acceptable donor sources of Gift Funds:
Yes, Interested Third Party contributions toward the home purchasers closing costs are allowed by FHA.
The maximum Interested Third Party contribution is 6% of the property sales price.
Interest Third Parties are defined as:
If you are an employee who receives a W2. We will need copies of your:
If you are self employed or receive a 1099 from your employer, we will need copies of your:
If you receive monthly statements:
If you receive quarterly statements:
Yes, be prepared to provide a copy of your: