FHA loans in Alabama allow purchases with:
Correct Answer
B) As little as 3.5% down payment (for borrowers with qualifying credit scores) with government mortgage insurance
FHA loans require a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, making them popular with first-time Alabama homebuyers. Borrowers with credit scores between 500 and 579 are required to make a 10% down payment. All FHA loans require mortgage insurance premiums (MIP), which protect the lender in case of default.
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Related Topics & Key Terms
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Related Concepts
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
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