FHA is a government agency and the largest insurer of low down payment home mortgage loans.
There are four additional government agencies which insure low to no down payment mortgages.
– The VA, or also referred to as The Department of Veterans Affairs
– The U.S. Department of Agriculture which backs a no-money-down payment mortgage that is available in most rural and suburban neighborhoods
– FNMA and FHLMC, more commonly referred to as Fannie Mae and Freddie Mac, which offer a 97 percent loan-to-value (LTV) for any person who qualifies.
The FHA loan can be a great fit for cash-strapped borrowers to obtain a home mortgage for minimum down payment.
FHA mortgage rates are also typically lower by 25 basis points (0.25%) as compared to a similar loan with Fannie Mae or Freddie Mac.
There are other reasons FHA is the largest insurer of home mortgage loans.
- Minimum credit score requirement of 580
- Sellers can contribute up to 6 percent towards closing costs and pre-paids.
- Down payment requirement of only 3.5 percent
- Non-occupied co-borrowers are allowed
- Down payment can come in the form of a gift from relative or non-profit.
- FHA loans can be “assumed” by a future buyer at the same interest rate.
In addition to these features, by financing via FHA homeowners, have access to the FHA Streamline Refinance, which is among the simplest and fastest refinance programs available today. The FHA Streamline Refinance guidelines waive verification of income, credit and employment, and require no home appraisal as long as your payments were made on time.