FHA Mortgage

Definition of an FHA Mortgage

An FHA mortgage is a mortgage that is secured by the federal government, specifically the Federal Housing Administration. Basically, this means that if a borrower quits paying and loses their home in a foreclosure, the government will make sure the lender doesn’t suffer any losses. You don’t actually get your mortgage from FHA; you must use an FHA-qualified lender. Since all lenders must originate their FHA loans based on the same core guidelines, it’s important to compare your mortgage options when getting an FHA loan.

Benefits of an FHA Mortgage

FHA mortgages have many benefits that can really make the difference for first-time home buyers or buyers with less-than-perfect credit. Some of the benefits of an FHA mortgage include the following:

Low Down Payment

FHA mortgages require as little as 3.5 percent down. This is one of the lowest down payments of any loan product currently available. Conventional products typically require between 10 and 20 percent down, so this is a huge benefit to those with a little less cash in the bank.

Easier To Qualify

The entire reason the government started the FHA program was to help extend mortgage loans to borrowers during and after the Great Depression. FHA has continued its legacy of putting homeownership within more people’s reach by having broader mortgage guidelines.

Assumable

One unique feature of FHA mortgages is that they are assumable. This means that someone may assume your home loan when you sell, if they qualify of course. This is a huge benefit when interest rates rise, as the low interest rate of your FHA mortgage can be assumed by your home’s new owners.

Co-Applicant and Gift Funds

For those needing a little extra push to get started, or for those with family members gifting them money, FHA allows for both co-applicants and gift funds. Co-applicants actually qualify for and are responsible for the mortgage with you. While there is no requirement as to who actually pays the mortgage, it must be paid on-time each month, or you will both be held liable. Gift funds can be used for a portion or all of your down payment for your FHA mortgage.

Other FHA Mortgage Considerations

Mortgage Insurance

All FHA mortgage loans whose loan amount is at or above 80 percent of the sales price will require mortgage insurance. Mortgage insurance comes in two forms: up-front and annual. Up-front mortgage insurance is paid when the loan is originated and equals 1.75 percent of the loan amount. Then, there is an annual mortgage insurance assessed on a monthly basis. The cost of this will vary based on several factors such as loan-to-value ratios and term length and can range from 0.45 percent to 1.35 percent.

Property Qualification Standards

While not strict, FHA can’t loan on all properties. It requires that properties meet its Minimum Property Standards (MPS). These standards include things such as a roof with a life of at least 2 more years, no exposed wood outside, and no cracked or broken glass.

Maximum Loan Amount

The maximum amount you can borrow on an FHA loan varies by county. Look up your county’s maximum here.

*A credit score of 500–579 requires a 10% down payment.

Words of Praise

I want to take the time to write and share my experiences working with Michael Koran and Primary Residential Mortgage. I first found Mike Koran back in 2009 online during one of the most uncertain financial times in History. As you can imagine I was skeptical of dealing with anyone I didn’t know personally but Michael was able to assuage me of that concern and I know that I had found the best lender I could have hope for who is honest and has an incredible work ethic while always keeping his clients best interests in mind and all times. Since then I have come back to work with Michael and his team on numerous occasions. I will always refer my family, friends and co-workers to Michael Koran and know that they will not only be in the best of hands but also get exceptional personalized service and incredibly good rates with very low costs.

Isabel S.

Mike and his team are extremely professional, responsive, and knowledgeable. I will continue to refer my clients, friends, and family to Mike as I know that they will be taken care of and in the hands of somebody that I trust.

Valerie F.

Before my wife and I set out to buy our first house we asked our financial advisors for lender recommendations. They only gave us one name: Michael Koran at Primary Residential Mortgage, Inc. After going through the entire process of securing a loan from start to finish, I can see why they didn’t mention anyone else. Buying a house is scary, especially if it’s your first time and you don’t understand the process. Mike was always there to alleviate our concerns and answer our questions. Without his knowledge and advice I would have been a nervous wreck. If you ever need to secure a loan quickly and need a responsive, reliable team that can close quickly, I would highly recommend Mike and his team. K

Kyle A.

My husband and I recently bought our first house in Walnut Creek. While the competition in this area is not as bad as Oakland and San Francisco, we decided to go with PRMI because we believed it would give us an advantage – Mike and his team were also strongly recommended. PRMI walked us step by step through the entire mortgage process so there were no surprises. They were extremely responsive throughout the whole process. Part of the reason my husband and I liked PRMI was because Mike’s team was able and willing to do tight close of escrow and they were very open to calling the seller’s agents assuring them of our strong financial situation.We would definitely use PRMI again!

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