The FHA, Federal Housing Authority, was created in 1934 as part of the National Housing Act . The FHA insures mortgages made by banks and other lenders. They also help to increase housing standards and create a more stable lending environment.
FHA loans are a popular choice for first-time homeowners. The credit restrictions and down payment requirements are lower than that of conventional loans. There are however tighter restrictions on the condition of the property.
Here's a few characteristics of FHA mortgage loans:
-Minimum down payment is 3.5% of purchase price
-FHA charges an upfront mortgage insurance premium(MIP) . This amount can be financed into loan.
-Down payment gifts are prohibited for anyone that will benefit from the transaction
-Debt-to-income (DTI) ratios are relaxed
Target customer for FHA loan: less than perfect credit, lower income, less cash available for down payment
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