The Federal Housing Administration (“FHA”) provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. This insurance reduces the risk to the lenders because the FHA will pay in the case of a loan default. In turn, lenders are willing to offer loans with a low down payment. The required down payment on FHA loan is only 3.5% if you have a credit score of 580 or higher. However, be aware that this is the minimum credit score required by FHA but an individual lender providing the FHA loans may require a higher score.
FHA Loan Pros:
- Easier to qualify than conventional loan
- Low down payment
- Loan can be assumed by the buyer when you sell your house
FHA Loan Cons:
- The mortgage insurance premiums are normally more expensive than conventional loans.
- You will continue to pay monthly mortgage insurance premiums for the life of the loan – even after you have built up substantial equity in the home.
- There is an up-front mortgage insurance premium of 1.75% of the amount of the loan.
- Relatively low FHA loan limits means FHA loans are not an option for higher priced homes. Currently in Brevard County the maxium FHA mortgage you can get on a single-family residence is $356,362.