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The most popular FHA home loan is the fixed-rate loan known as the 203(b). It often works well for first time home buyers. It allows individuals to finance up to 96.5% of their home loan and helps to keep down payments and closing costs.

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May 24, 2018
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The Path to Homeownership
FHA.com is a private company, is not a government agency, and does not make loans.

Fixed Rate FHA Loans

The Popular 203(b) Federally Guaranteed Mortgage

Get the Full Story About FHA Loans

Home ownership rates in America continue to increase at a steady rate due in a large part to the implementation of FHA home loans insurance program. Over the years, FHA has helped Americans gain the financial independence that comes with owning a home. By creating jobs and reasonable mortgage rates for the middle class, financing military housing, and producing housing for the low income and the elderly, FHA has helped Americans become some of the best housed people in the world with over 74.5 million Americans currently owning their own homes. FHA has insured more than 40 million home loans since 1934.

HOW IT WORKS

By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA's mortgage insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines.

FHA loans benefit those who would like to purchase a home but haven't been able to put money away for the purchase, like recent college graduates, newlyweds, or people who are still trying to complete their education. It also allows individuals to qualify for a FHA loan whose credit has been marred by bankruptcy or foreclosure.

NUTS AND BOLTS

The most popular FHA home loan is the 203(b). This fixed-rate loan often works well for first time home buyers because it allows individuals to finance up to 96.5 percent of their home loan which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency.

Insurance on FHA mortgages are often rolled into the total monthly payment at 0.55 percent of the total loan amount which is roughly half of the price of mortgage insurance on a conventional loan. FHA will collect the annual MIP, which is the time on which you will pay for FHA Mortgage Insurance Premiums on your FHA loan. Cancellation of the premiums are as follows:

  • No more than 15 year term
    Loan to value at closing up to 90%
    11 year termination
  • No more than 15 year term
    Loan to value at closing greater than 90%
    No cancellation until loan paid off
  • Greater than 15 year term
    Loan to value at closing up to 90%
    11 year termination
  • Greater than 15 year term
    Loan to value at closing greater than 90%
    No cancellation until loan paid off

GUIDELINES

It is not necessary to meet a minimum income requirement in order to qualify for a FHA loan but debt ratios specific to the state in which the home will be purchased have been put into place to prevent borrowers from getting into a home they cannot afford. This is done through a close analysis of income and monthly expenses.

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FHA Loan Articles and Mortgage News

Down Payment Rules for VA One-Time Close Loans

May 19, 2018 - There is a big difference between FHA One-Time Close (OTC) construction loan program and the VA One-Time Close version. FHA OTC loans require a down payment, while VA mortgage loans allow qualified borrowers the option of a zero-money down construction loan.

Approving Your FHA Home Loan: Debt Issues

May 15, 2018 - How does your participating FHA lender decide to approve or deny your FHA mortgage loan? It doesn’t matter if you are applying for a construction loan, refinancing, or buying an existing home. Lenders must follow certain steps to determine your creditworthiness.

One-Time Close Loans: USDA, VA, and FHA

May 8, 2018 - The Department of Veterans Affairs, The USDA, and the Federal Housing Administration all offer a version of this with aspects that may be unique to each one; for example, VA One-Time Close construction loans feature no VA-required down payment (like other VA home loans) for qualified borrowers.

Do FHA One-Time Close Mortgages Require a Down Payment?

May 1, 2018 - There are FHA One-Time Close construction loans, but also USDA and VA One-Time Close construction loans. When you choose the FHA version of the OTC, there are some important differences you should know.

FHA Construction Loan Rules and Lender Requirements

April 28, 2018 - When you examine your FHA construction loan options, choosing between a One-Time Close construction loan and other construction loan options with two loans and two closing dates are only part of your decision-making process.

FHA.com Reviews

FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!