Achieving the Dream of Home Ownership FHA - Insured Loans (Part I)

The Federal Housing Administration (FHA) was created in 1934 to protect lenders against losses that result from defaults on home mortgages. Most FHA loans are longer term and only require a 3% to 5% down payment, with a minimum of 3% coming from the borrower's own funds.

Special Features of FHA Loans:

1. Available for owner-occupied and rental housing

2. Borrowers can finance 100% of closing costs.

3. Secondary financing to provide cash for the down payment is prohibited.

4. There is no prepayment penalty.

5. The interest rate is a floating rate fixed by the marketplace.

6. The usual term of the loan is 30 years.

7. Additional mortgage insurance (.5% per year of the total loan amount) is required for borrowers making a down payment of less the 20 percent.**

8. FHA also charges an upfront Mortgage Insurance Premium of 1.5%**

** Of course if you are able to save or secure the 20% down payment, you can save these additional insurance payments.

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