FHA loans are typically easier to qualify for than other types of loans since they are insured by the federal government, guaranteeing the lending institution against loss from default. The down payment can be smaller, as low as 3.5% of the property price. Additionally, the down payment can be from a qualified gift. FHA loans allow the borrower to cosign with a non-occupant family member (single-family homes only). FHA loans are available in 15 or 30 year terms in both fixed rate mortgages and adjustable rate mortgages.
Benefits of an FHA Loan
- Generally easier qualifications
- Lower down payment
- Do not have to be first time homebuyers
- Seller may contribute a maximum of 6% of the lower of the sales price or the appraised value
Who should apply for an FHA Loan?
- Someone who doesn’t have a lot to put down on a property
- First time homebuyers