loading...

First-Timer Primer: Understanding FHA Loans

by Lark Turner

image

To get first-timers ready for the spring market, UrbanTurf will be a running a series of articles next week to help educate buyers on the process. Here is an article that gives a sense of the type of topics we will cover.

A slightly looser mortgage lending market, along with the recent lowering of the Federal Housing Administration’s (FHA) mortgage insurance rate, have made FHA loans more palatable than ever. In this First Timer Primer, we run down the basics of FHA loans and who’s eligible for what.

How is an FHA loan different from a regular loan?

The program’s goal is to help buyers with low or moderate incomes, or less-than-stellar credit, build equity through homeownership. FHA loans are guaranteed by the federal government and down payments are generally much lower than those on a standard mortgage (e.g. 3.5% versus 10-20%), because those buyers usually can’t front a high down payment. In exchange for getting this low down payment, though, FHA buyers must pay mortgage insurance to the federal government to help offset its risk. That’s a long way of saying your monthly payments will likely be higher, and you’ll be paying more over the life of a loan, with an FHA loan. You’ll also have to pay an upfront mortgage insurance premium (MIP) of 1.75 percent of the home loan, which can be paid at closing or included in the mortgage.

The higher mortgage insurance costs may be enough to scare some buyers off, but FHA recently lowered the mortgage insurance rates on its loans, making it a more attractive option for the average buyer.

Down Payment

Down payments with an FHA loan can be as low as 3.5 percent. To be eligible, a buyer has to have a credit score of 580 or higher. Those with lower scores must put down at least 10 percent.

Loan Limits

DC is considered a “high cost area” by FHA. That means residents can buy one-unit homes and receive an FHA loan for up to $625,500, the maximum loan amount offered by the FHA.

Refinancing

As we’ve previously reported, now is a pretty good time to think about refinancing thanks to low interest rates. Even buyers with a conventional mortgage currently can refinance with an FHA loan. Lender Ryan Dailey recently told UrbanTurf that the agency’s recently-lowered mortgage insurance rates could make FHA a viable option for buyers who meet the loan limits.

“Even if the rate is the same or slightly lower, if you can snag the new mortgage insurance it’s going to make the payments markedly lower,” he said. “Basically, it’s making FHA attractive again.”

See other articles related to: fha mortgage insurance, fha loans

This article originally published at http://dc.urbanturf.com/articles/blog/first_timer_primer_understanding_fha_loans/9636

0 Comments — Be the First!

Join the discussion

UrbanTurf now requires registration in order to post comments. Register here, or login below if you are already registered.

Click here if you forgot your password.



DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Ballston
Looking to Give People A Reason to Stay Past 6pm
Clarendon
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Rosslyn
Hitting Its Growth Spurt
Shirlington
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
Huntington
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
Parkfairfax
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »

Maryland

Profiles of 14 neighborhoods in suburban Maryland

Annapolis
Small-Town Living in the State Capital
Bethesda
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
Potomac
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
Wheaton
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Hyattsville
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Bloomingdale
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
Brightwood
DC’s Northern Neighborhood on the Cusp
Burleith
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
Crestwood
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Fort Totten
Five Years Could Make a Big Difference
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
Georgetown
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
Kalorama
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
Palisades
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Petworth
Getting a Vibrancy of Its Own
Shaw
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Takoma
Not To Be Confused With Takoma Park
Tenleytown
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

Brookland
New Development Could Shake Up Pastoral Peace
Deanwood
A Little Bit of Country Just Inside the District’s Borders
Eckington
Not to Be Confused With Bloomingdale
H Street
A Place To Party, and To Settle Down
Langdon
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
NoMa
Evolving from a Brand to a Neighborhood
Rosedale
Ripe for Investment Right About Now
Trinidad
The Difference 5 Years Makes
Woodridge
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Hillcrest
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾