5 Things You Didn’t Know About FHA Loans


Thinking of an FHA loan? Did your loan officer suggest FHA financing for your situation? For buyers who want to come to the settlement table with as little cash as possible then the FHA mortgage is certainly an option. Yet here are five things you may not now about this mortgage.

It’s Guaranteed

FHA loans come with a guarantee to the lender. Not to you, but to the lender. Should the loan ever go into default the lender is compensated for the loss as long as the lender approved the loan using proper FHA guidelines. This guarantee is financed by two mortgage insurance policies, an upfront policy equal to 1.75% of the loan amount and an annual premium paid in monthly installments.

It’s Easier

Minimum credit scores for FHA loans are typically lower compared to conventional loan programs with a down payment of less than 20% of the sales price. While the FHA doesn’t set a minimum credit score individual mortgage lenders do and this minimum is a score of 580.

Competitive Rates

Conventional loan programs can ask for a down payment as low as 3-5% of the sales price of the home keeping it competitive in some ways with the FHA loan. However, the interest rates on conventional loans with a low down payment option are typically higher than an FHA mortgage.

Varying Loan Limits

FHA loan limits can vary by county and are calculated using 115% of the median home value for the area.  There are also so-called “high cost” areas where FHA loans can be used for loan amounts as high as $625,500.

Your Lender Does It

The FHA doesn’t approve your mortgage application nor review the property appraisal. Instead, individual lenders who are approved by the FHA to underwrite and approve FHA loans do. An FHA approved lender originates, approves and funds the application as well as ordering the appraisal.

For more information or questions about mortgage loans,
Please visit Majestic Home Loan

Or Call  (855) 757-8748

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