FHA Home Loans

FHA, also known as the Federal Housing Administration, operates under the control of the Department of Housing and Urban Development (HUD) and has the primary responsibility for administering the government home loan insurance program. This program allows buyers who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA.

The most popular FHA home loan program nationwide is the 203(b) FHA home loan (see below) that only requires a minimum of 3% from the borrower and permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.

The main advantage to a FHA home loan is that the credit criteria for a borrower are not as strict as FNMA or FHLMC. Someone who may have had a few credit problems should not have a problem obtaining FHA financing. Also, FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller must pay for part of the "traditional" closing costs (called non-allowable costs) while a borrower's allowable costs can partially be wrapped into the loan. 100% of the down payment and closing costs can be gifted.

The greatest disadvantage of FHA home loans is the upfront mortgage insurance premium (MIP). On a 30 year FHA home loan that equals to 2.25% of the loan amount (2% for a 15 year) in addition to the 0.5% annual renewal premium that a borrower will pay for the life of the loan. In addition, FHA limits the amount a borrower can borrower.  Click on the column to the right to find out the FHA loan limits in Arizona. 

There are several notable FHA home loan programs available as characterized below.  Click on the title to learn more about that program:

Standard fixed rate (FHA 203b)

FHA adjustable rate mortgage (FHA 251)

FHA 2-1 buydown (FHA 203b, FHA 251)

Energy Efficient Mortgages Program