Good Faith Mortgage LLC

The Federal Housing Administration (FHA): Expanding Homeownership Opportunities

Established in 1934, the Federal Housing Administration (FHA) aims to improve housing construction and financing. As part of the U.S. Department of Housing and Urban Development (HUD), FHA provides mortgage insurance on single-family, multifamily, and manufactured homes across the United States.

Key Points about FHA Loans:

1. Role: FHA doesn't lend money; it insures mortgages, protecting lenders from loss in case of borrower default.

2. Mortgage Insurance Premiums:
- Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the base loan amount
- Annual MIP: 0.55% of the loan amount

3. Down Payment and Credit Score Requirements:
- 3.5% down payment with a minimum credit score of 580
- 10% down payment for credit scores between 500-579

4. Basic FHA Loan Requirements:
- Steady employment history (two year history)
- Valid Social Security number and lawful U.S. residency
- Primary residence occupancy only
- Property appraisal from an FHA-approved appraiser
- Debt-to-income ratios: Front-end ratio < 31%, Back-end ratio < 43% (exceptions possible)
- Post-bankruptcy: Typically two years out with re-established good credit
- Post-foreclosure: Typically three years out with re-established good credit

5. FHA Loan Programs:
- 203b: Fixed Rate Program (10-30 year terms)
- 203k: Purchase and Rehabilitation program
- 251: Adjustable Rate Program (1, 3, 5, 7, and 10-year adjustable rates)
- 234c: Condominium Program

FHA loans offer an accessible path to homeownership, especially for first-time buyers or those with less-than-perfect credit. The combination of low down payment requirements and more lenient credit criteria makes these loans an attractive option for many prospective homeowners. However, the ongoing mortgage insurance premiums should be carefully considered when evaluating the long-term costs of an FHA loan.

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