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FHA Loans: Requirements, Limits, and Benefits

FHA Loans: Requirements, Limits, and Benefits

Overview of FHA Loans

An FHA loan is a government-backed mortgage with easier credit qualification. FHA loans are great for those with low or limited credit (FICO below 700).

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Product requirements

Meeting product requirements does not guarantee qualification. All loan product offerings are subject to underwriting approval and do not represent a commitment to lend.
3.5%
Minimum down payment
620
Minimum credit score
55%
Max debt-to-income
ZERO
Closing costs

Product benefits

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Easier qualification

FHA loans have less stringent qualification requirements related to your debt-to-income ratio (i.e. how much of your monthly income is used to pay debt).

Lower down payment

You are only required to make a down payment of 3.5% on an FHA loan. Conventional loans require at least 5% to qualify.

Refinance options

FHA loans have streamlined refinance programs should you decide to take advantage of lower interest rates in the future. These refinances are referred to as FHA Streamlines, which have fewer documentation requirements and may not require an appraisal.

Additional considerations

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Monthly mortgage insurance

All FHA loans require mortgage insurance, which will increase your monthly payment. Conversely, the conventional fixed-rate loan does not require mortgage insurance with a 20% down payment and can be cancelled later in the loan term.

Upfront mortgage insurance

FHA loans also require an "Upfront Mortgage Insurance Premium." This is a one-time mortgage insurance payment that is typically financed into your loan amount. Conventional fixed-rate loans never require such insurance.

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