What Is A FHA Mortgage?

What is a FHA mortgage?

FHA Mortgage is backed by the Federal Housing Administration. FHA Mortgages allow for borrowers with a lower credit score, lower down payment and a higher income to debt ratio to qualify for a mortgage.

What Fico score do I need for an FHA mortgage?

There is no minimum credit score for an FHA Mortgage Loan, but most lenders have their own overlay and will use a minimum credit score of 580 to qualify.

Can I increase my down payment if my Fico score is low?

Increasing your down payment will not help if your credit score is too low. However, your mortgage lender can help you repair your credit score to qualify for an FHA Mortgage in the future.

What is the minimum down payment?

The minimum down payment is 3.5% of the sale price.

Can my down payment be more than 20%?

Yes, you can put down as much as you want above the minimum, but you will still have Private Mortgage Insurance. This may not apply if your FHA Mortgage is 15 years as opposed to 30 years.

What is the FHA Mortgage Front End Ratio?

The front-end ratio is calculated by using the “total” mortgage payment and divided into your monthly income. This ratio typically cannot exceed 50% and is based on your credit score.

What is the FHA Mortgage Back End Ratio?

The is calculated by using the total mortgage payment plus all other monthly debts divided into the monthly income. This ratio typically cannot exceed 56% depending on the credit scores.

Are there additional FHA Mortgage Costs Involved?

Yes, FHA Mortgages have a fee of 1.75% of the mortgage amount. This fee is a closing cost and not paid out of pocket at closing. It will be added to the balance of your mortgage.

What is a Seller concession?

A sellers Concession is a credit given by the seller towards closing costs and pre-paid items. The maximum amount allowed is 6% of the sales price.

What is FHA Mortgage Insurance?

FHA Mortgage borrowers pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.

What does FHA Mortgage Insurance Cost

The upfront mortgage insurance premium costs 1.75% of your loan amount. You’ll pay the upfront premium at the closing table. If you’re borrowing $200,000, for example, your upfront MIP will be $3,500 ($200,000 x 1.75% = $3,500). The monthly mortgage insurance is .085% of the balance of the mortgage divided by 12 months. For example, a $200,000 mortgage would be $144.66. ($200,000 X .0085 :/ 12 = $144.66).

Does FHA Mortgage Insurance Go Away?

No, mortgage insurance is for the life of the FHA loan. If you were to refinance into a conventional loan or a 15-year FHA loan then the mortgage insurance can be removed.

Can I have more than one FHA Mortgage at a time?

Typically, FHA only allows for each borrower to have only one FHA backed mortgage. But there are certain circumstances that will allow for an additional FHA loan. Consult with your lender for these guidelines.

What types of homes can I purchase with an FHA Mortgage?

FHA Mortgages can be used to purchase 1-4 family unit properties, including condos and townhomes. Not all condominium and townhome complexes are approved for FHA financing. Be sure to ask your FHA mortgage lender if the complex you are considering is FHA approved.

Is there a limit on a FHA Mortgage?

FHA Mortgage limit is determined by which county the property is in.

For Bergen, Essex, Morris and Passaic Counties the maximum mortgage limit is $726,525 for a single-family home.

  1. Two units, $930,0300
  2. Three units, $1,124,475
  3. Four units, $1,397,400

Is a FHA Mortgage Appraisal stricter?

FHA appraisal is stricter and focuses on the health and safety of the occupants. Meaning any peeling or chipping paint will need to be repaired prior to the closing. As well as any other health or safety concerns.

Have more questions or would like to start the FHA Mortgage process?

Contact Jonathan Joachim, Caliber Home Loan Consultant, NMLS ID: 413808, 25A Vreeland Road, Suite 104, Florham Park, New Jersey 07932. His mobile number is 973-981-3403 or by email

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