5 Must-Know Facts on FHA Home Loans – Boston

As an experienced loan officer operating in the Greater Boston area, I’m often approached by prospective home buyers. More and more people are interested in FHA loans, and rightly so: they boast better interest rates, minimal down payments, and lenient credit qualifications.

As crucial as these loans insured by the Federal Housing Administration (FHA) are, I’ve found that most first-time buyers know little to nothing about the finer details. Here are 5 absolutely essential facts to know FHA loans.

Logo of the Federal Housing Administration.
Logo of the Federal Housing Administration. (Photo credit: Wikipedia)

1. The Minimum Down Payment in Minuscule

Many mortgages require a down payment equal to 5, 10, or even 20% of the property’s purchase price. In stark contrast, the minimum down payment for an FHA-insured loan is a microscopic 3.5%. Better yet, borrowers can make the payment using a grant from a government program or even a gift from a family member.

2. You Don’t Need Immaculate Credit

Unlike most places you look, FHA loans don’t require a minimum credit score. That doesn’t mean everyone is blindly approved, but the FHA does consider your credit in context and is often willing to cut you some slack for extenuating circumstances. Lenders, however, may impose their own requirements, so be sure to discuss such limits upfront.

3. Mortgage Insurance Premiums are Non-Negotiable

Now for some less-than-stellar news: all FHA loans come with two mortgage insurance premiums. An upfront premium of 2.25% is paid as soon as the loan is secured,  though it may be financed. On top of that, an annual premium of 0.55% is due monthly as a part of each mortgage payment. Despite these costs, an FHA loan is typically still the best offer around.

4. Extra Loan Available for Repairs

The Federal Housing Administration offers a loan product, called a 203(k), for borrowers who need to repair the property. A particular feature that makes this loan especially valuable is the fact that the size of the loan is based on the projected property value after the repairs, not the current value.

5. FHA-Approved Lenders Only

Contrary to popular belief, FHA loans don’t come directly from the Federal Housing Administration. In actuality, the FHA is not itself a lender. They merely insure loans, but only through FHA-approved lenders, who may have their own individual rates and conditions.

We offer FHA-insured mortgage loans in the Greater Boston area; if you have any questions or inquiries, don’t hesitate to contact us for more information.

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Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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