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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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February 16, 2020
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FHA.com is a privately owned website, 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

FHA Loans: It May Be Better to Buy Instead of Rent

January 31, 2020 - Buying a home instead of renting it means doing some financial housekeeping to get started. Don’t forget to review FICO scores and credit reports and payment history to make sure you have made on-time payments for the 12 months leading up to the loan application.

Home Loan Scams to Watch Out for in 2020

January 27, 2020 - There are common home loan scams that affect house hunters, even those applying for FHA home loans. There are scams that affect borrowers at several stages of the home loan process--there is even a scam that can affect you after you have closed the deal and moved into your new home.

FHA Loan Applications

January 26, 2020 - What do you need to successfully fill out and submit an FHA loan application? Buying a home is more efficient when you get pre-approved for the loan. Pre-approval is not the same as loan approval and you will need to discuss that nuance with your loan officer before house hunting.

One-Time Close Construction Loans: No Loan Limits?

January 21, 2020 - Is there really a construction loan that lets you build a house on your own lot with no loan limit? AND a zero-down loan at that? Believe it or not, such a loan DOES exist. It’s the VA Construction Loan, which can be offered as a One-Time Close mortgage.

Tips for FHA Home Loan Cosigners

January 18, 2020 - FHA loans permit cosigners, co-borrowers, even non-occupying co-borrowers. The rules for cosigning, co-borrowing, etc. are found in HUD 4000.1, the FHA Lender’s Handbook, but there may also be additional standards imposed by the lender.