The FHA Mortgage

This mortgage is a product for first-time home buyers, and in fact, is geared towards first-time home buyers. This is a government-backed loan that many people use to purchase their first home. This is especially true if you don’t have 20% saved up for the down payment. The down payment on an FHA loan can be 3.5%, and that money can be a gift from a close family member. This mortgage program is an alternative to the conventional mortgage, for those that have lower credit scores.

Pros:

• 3.5% minimum down payment, can be from gift funds
• Relaxed standards for credit score (compared to conventional)
• Usually a better interest rate

Cons:

• Mortgage Insurance Premium to be paid up-front, at closing (higher closing costs)
• Mortgage Insurance Premium monthly (higher monthly costs)
• FHA has a minimum standard that the house has to meet, work orders may need to be rectified before closing on the house