FHA loans require a minimum 3.5% down payment with a credit score of 580 or higher (10% down required for scores 500-579). All FHA loans require mortgage insurance premium (MIP)—both an upfront premium paid at closing and an annual premium paid monthly. Unlike PMI on conventional loans, FHA MIP is typically required for the life of the loan if the down payment is less than 10%. FHA loans have maximum loan limits that vary by county.
A first-time buyer with a 600 credit score makes a 3.5% down payment on a $250,000 home, borrowing $241,250. The buyer pays an upfront MIP of 1.75% ($4,222) at closing plus monthly MIP of approximately $140, which is added to the mortgage payment.
Key FHA facts for the exam: 3.5% minimum down payment (not zero), MIP required for life of loan (if less than 10% down), FHA insures but does NOT lend money (private lenders originate FHA loans), and the property must meet FHA minimum property standards.
Related Terms
Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Foreclosure is the legal process by which a lender takes possession of a property when a borrower fails to make mortgage payments. It allows the lender to sell the property to recover the outstanding debt.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
Frequently Asked Questions
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