An FHA loan is a mortgage insured by the Federal Housing Administration, designed to make homeownership more accessible to a broader range of buyers. There are several features that set an FHA loan apart from other programs.
FHA loans have specific limits on how much you can borrow, which vary by county. Currently, in 2024, the loan limit can reach up to $749,827 in high-cost areas, although it may be lower in other regions. The down payment requirement for an FHA loan is notably low at just 3.5% of the purchase price. This lower down payment can help buyers who may not have substantial savings for a larger down payment, making homeownership more achievable.
One unique feature of FHA loans is the ability to use gift funds for the down payment and closing costs. These funds must come from an approved source, such as a family member. This flexibility can be especially beneficial for buyers who receive financial assistance from relatives or other sources.
Finally, when considering an FHA loan, it’s important to understand the requirements to obtain the mortgage. For one, mortgage insurance, called MIP, is required. Borrowers pay an upfront premium at closing, as well as an annual premium that is typically included in the monthly mortgage payments. FHA loans also have certain property eligibility requirements and appraisal guidelines to ensure the home meets minimum standards.
Choosing an FHA loan can be a smart option for many prospective homeowners due to its high loan limits, manageable down payment, and flexibility with gift funds. If you’re considering buying a home and want to explore your mortgage options, an FHA loan could be a pathway to achieving your homeownership goals. Contact an Ellason Loan Officer for more information.
