FHA insured mortgages offer many benefits and protections that only come with FHA:
Easier to Qualify: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.
Less than Perfect Credit: You don't have to have a perfect credit score to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.
Low Down Payment: FHA loans have a low 3% downpayment and that money can come from a family member, employer or charitable organization as a gift. Other loan programs don't allow this.
Costs Less: FHA loans have competitive interest rates because the Federal government insures the loans. Always compare an FHA loan with other loan types.
Helps You Keep Your Home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, FHA has many options to help you keep you in your home and avoid foreclosure.
FHA does not provide direct financing nor does it set the interest rates on the mortgages it insures. For the best interest rate and terms on a mortgage, you should compare mortgages from several different lenders. In order to initiate the loan application process, please contact an FHA approved lender.
An FHA insured mortgage may be used to purchase or refinance a new or existing 1-4 family home, a condominium unit or a manufactured housing unit (provided the manufactured housing unit is on a permanent foundation).
HUD's internet site can provide additional information on FHA mortgages by going to: http://www.hud.gov/buying/index.cfm
You can also find an FHA approved lender in your area by going to: http://www.hud.gov/ll/code/llplcrit.html
You may also wish to contact a HUD approved housing counseling agency in your area for unbiased and free counseling on your particular situation. You can find a list of these agencies at http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
There are also many local and State government programs available that use HUD and/or non-HUD funds to provide grants for the downpayment or to help pay closing costs. To find out what programs are available in your area visit http://www.hud.gov/buying/localbuying.cfm
Finally, if you would like to see a short webcast video about the homebuying process, visit the following web site: http://www.hud.gov/webcasts/archives/buying.cfm
Termination of the FHA monthly mortgage insurance premium (MIP) is based on several factors including: the loan term, loan-to-value (LTV) at loan origination and regulations in place when the loan is closed. Generally, loans closed prior to January 1, 2001 will not be eligible for termination of MIP, which is collected as part of your monthly mortgage payment.
For loans closed on or after January 1, 2001, FHA's MIP will be automatically terminated under the following conditions:
1. For mortgages with terms more than 15 years, the MIP will be terminated when the Loan to Value (LTV) ratio reaches 78%, provided the
borrower has paid the MIP for at least five years. If the LTV reaches 78% and the borrower has not paid MIP for at least five years then the borrower must continue to pay MIP until the five year requirement is met.
2. For mortgages with terms 15 years and less and with LTV ratios of 90% and greater, the MIP will be terminated when the LTV ratio reaches 78%, irrespective of the length of time the borrower has paid the MIP.
3. Mortgages with terms 15 years and less and with LTV ratios of 89.99% and less will not be charged MIP.
Note: The MIP cancellation provision excludes those loans not insured by the Mutual Mortgage Insurance (MMI) fund. The MMI does not cover
mortgage on condominiums or Section 203(k) rehabilitation loans.
Although the MIP will be terminated as described, the FHA insurance will remain in force for the loan's full term. This MIP termination provision only applies to loans where the borrower also paid an Up-front MIP at closing.
FHA will determine when a borrower has reached the 78% LTV ratio based on the lesser of the sales price or appraised value at loan origination. For example, if the lesser of the sales price or the appraised value at origination was $100,000, when the loan amount reaches $78,000, HUD will no longer collect MIP on the loan.
FHA's regulations do not permit a borrower to submit a new appraisal to reach the threshold for termination of MIP. Termination of MIP will normally be based on the scheduled amortization of the loan. However, borrowers may reach the 78% threshold in advance of the scheduled amortization because of prepayments of loan principal. A borrower whose loan reaches the 78% LTV threshold sooner than projected because of prepayment may have the MIP terminated (but not sooner than five years from loan closing for loans with terms greater than 15 years) if the borrower has not been more than 30 days delinquent in paying the mortgage payments during the previous 12 months. The borrower must submit a termination request to the lender and the lender must provide the borrower's request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination.
http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm; MLs 00-38 and 00-46