- FHA loans are offered through commercial lenders such as banks and credit unions, but the funds are guaranteed through the government. The lender receives the guaranteed money from the government in the event that you default on an FHA loan. FHA loan qualification generally requires a 620 credit score, although those with scores as low as 580 can qualify in some situations. The down payment requirement is 3.5 percent, although you can pay more if you wish to.
- The house you are interested in needs to be inspected for damages and problems prior to entering in the contract. FHA mortgages require that the house pass inspections. The house also needs to be appraised so that the lender knows how much of a mortgage is needed to purchase the home. These fees are paid prior to closing on the home.
- FHA restricts the closing costs on FHA loans to "customary and necessary" costs associated with closing a mortgage. These fees cannot be inflated beyond the cost required for each type of closing cost. Examples of standard FHA closing costs include credit report fees, title searches, attorney costs and government recording fees.
- FHA mortgages also require you to pay part of your mortgage insurance upfront. This fee can range from 0.5 percent to 1.5 percent, and the lender is free to set the upfront payment anywhere in this range. This upfront payment for your mortgage insurance is a fee commonly seen only on FHA mortgages.
FHA Loan Basics
Inspection and Appraisal
Closing Costs
Upfront Mortgage Insurance
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