The Federal Housing Administration offers private loans for existing or new home purchases as well as programs for home repairs for borrowers seeking an FHA Loan.
What Is An FHA Loan?
The FHA is a government agency inside the U.S. Department of Housing and Urban Development. An FHA loan is a type of mortgage that is insured by the Federal Housing Administration. Borrowers with FHA loans are required to pay for mortgage insurance so the lender is protected from a loss if the borrower happens to default on the loan itself. Due to the credibility of this insurance, lenders offer borrower-friendly FHA mortgage rates. Like the VA Loan, the Federal Housing Administration allows lenders to be flexible when considering applicants.
FHA Down Payment Requirements
You are only required to pay 3.5% of the total loan towards a down payment with an FHA loan. When comparing this aspect to other loans, this amount is significantly smaller and more affordable for most buyers, especially first-time homebuyers. With an FHA loan, you are able to make the downpayment with your own monetary savings or other forms of income. Borrowers can also use cash gifts from relatives, grants from the government, or down payment assistance programs to help them make this payment, which is not always an option with other types of loans.
Not only does the Federal Housing Administration offer FHA home loans, it also offers special loan products pertaining to home repairs. The 203(K) loan focuses on the projected value of the home once repairs are completed. Since it does not focus on the current appraised value of the home, you are able to finance up to $35K towards nonstructural repairs with this type of loan. The repairs can include home fixtures, painting supplies, and other replacement expenses.