You can obtain an FHA loan for the purchase of a multi-family unit, single-family residence, and condominiums. Restrictions vary by location, so ask your FHA-approved lender for additional information.
To protect yourself from predatory lenders, work with FHA-approved lenders only. You can become a victim of loan fraud by giving your personal information to the wrong people. Also make sure that you’re not using your Realtor as your lender. In my opinion that is not going to get you someone that is good at one or the other, if they are dipping into two completely different legs of the transaction, how can you be an expert in either? Would you go to your dentist to get your hair done? I didn’t think so.
FHA loans have a maximum purchase price that varies by location. Check with your FHA-approved lender to determine what that price ceiling is. If the purchase price of your new home exceeds the maximum purchase price of the FHA loan, you will be responsible for the difference.
There are three FHA loan programs:
- FHA 203(b) fixed-rate mortgage (15- or 30-year loans)
- FHA 251 adjustable-rate mortgage
- FHA 203(k) rehab loans for properties needing rehabilitation.
To qualify for an FHA mortgage, borrowers must:
- Have a positive credit history spanning the last two years.
- Show consistent or increasing income.
- Have a steady employment record (two years or more with the same employer is perfect, but not always necessary).
- Have no bankruptcies in the last two years.
- Keep the mortgage payment at approximately 46% of their gross income or less.
The FHA does not supply the loans, rather they insure them to protect the lenders. This program means less risk for lenders which creates low down payments for borrowers.
Not all lenders deal with FHA mortgage loans. Before applying for a mortgage loan, applicants should always check first to make sure that the lender actually processes FHA loans. The lender should also be FHA-approved.
The most popular FHA loan has a minimum cash investment requirement of 3.5% but permits 100% of the money needed at closing to be a gift from a relative.
Shop rates when looking for a FHA mortgage. The rates are established by the lender, not the government, so they will vary. FHA loan rates are typically lower than conventional (non-government guaranteed) unless you have credit problems.