FHA Loans

What does FHA have for you?

FHA stands for Federal Housing Administration, which is governed by HUD – The U.S Department of
Housing and Urban Development. Many people believe this product is restricted to first time home
buyers, but that is not accurate. However, the FHA home loan product is often used for first time buyers
who are still working on establishing good credit. Credit score is NOT the driving factor with FHA loans.
We’ve closed FHA loans with credit scores below 550! Therefore, the FHA product is often geared
toward individuals with lower credit scores. You can still get a very good, fixed interest rate, even if your
credit score is low.

****SIDE NOTE**** Talking about mortgage stuff really gets us excited (we take pride in being
mortgage nerds), but there is not enough time to discuss every little detail. Your best bet is to give us a
call at 502-742-1502 and speak to a real mortgage expert.

What About FHA Down Payments and Qualifying Credit Scores?

If your credit score is 580 or better, the minimum down payment is 3.5% of the purchase price of the
home. For example, if you purchase a home for $200,000, the down payment would be a minimum of
$7,000. If your score is below 580, you will need 10% down. Also, the size of your down payment will
affect how much you pay in monthly Private Mortgage Insurance (PMI) and when the PMI will go away.
With just 3.5% down, your PMI is 85 basis points and will last the entire duration of the loan. The
calculation of the monthly PMI payment is: Total Loan Amount (x) .0085 (/) 12 months = Monthly PMI.
If you put down 5% to 9.99%, your PMI is 80 basis points and will last the entire duration of the loan. If
you put down 10% or greater, the PMI is still 80 basis points, but the PMI will go away after 10 years.

There is another caveat with FHA home loans. In addition to the monthly PMI, this product also requires
an upfront fee of 1.75% that is financed into the loan amount. For example, and $200,000 home
purchase price with $7,000 down puts the base loan amount at $193,000. The calculation for the
upfront mortgage insurance is: Base Loan Amount (x) .0175 = upfront, financed mortgage insurance. In
this example it would be $3,377.50. You are not allowed to finance “cents,” but the $3,377 would be
added to the base loan amount, bringing the total loan amount to $196,377.

Although the PMI is a bit daunting, don’t worry, because most people will NOT keep the same home for
an entire 30 years. You may refinance your FHA loan after seven payments if your credit score
improves. Our Broker House Lending staff will assist you with improving your credit score and getting
you eligible for Conventional financing.

The FHA offers 30, 20, and 15 year fixed rate products. Some lenders will even do an odd number of
years. Also, the FHA does have Adjustable Rate Mortgages (ARMs).

FHA loans have helped out millions of homeowners. It is a great product to get your foot in the door
(pardon the pun). Broker House Lending loan officers are FHA experts. We’d love to work with you and
earn your business. Just click this link to get started.