An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), a part of the U.S. Department of Housing and Urban Development (HUD). It's designed to make homeownership more accessible to people with lower credit scores and down payments.
Some key features:
Lower Down Payment: One of the biggest advantages is the ability to put down as little as 3.5% of the home's purchase price.
Credit Flexibility: FHA loans are more lenient on credit scores compared to conventional loans, making it easier for people with less-than-perfect credit to qualify.
Mortgage Insurance: Because of the lower down payment and credit flexibility, borrowers pay a mortgage insurance premium (MIP). This protects the lender in case of default.
Loan Limits: FHA loans have maximum loan amounts that vary by location. These limits are generally lower than those for conventional loans.
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The FHA loan scheme is started by the U.S. Department of Housing and Urban Development. They offer mortgage loans to people who want to buy their own home.
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