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FHA Financing

FHA financing is a safe and affordable loan option for many home buyers. Contour Mortgage is an approved FHA direct lender that offers a low down payment, low 30-year fixed rates, quick and easy approval and a fast closing process.

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What is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), which is within the U.S. Department of Housing and Urban Development (HUD). It is offered through various mortgage lenders who have been approved by the government agency.

Established in the early 20th century as a part of the National Housing Act of 1934, the FHA offers an alternative option to the conventional mortgage loan. These loans make it easier for borrowers to achieve their dream of home-ownership, as they tend to have more flexible qualification requirements.

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fha loan

For instance, with an FHA loan:

  • Your down-payment can be as low as 3.5% of the purchase price. This is significantly lower than other mortgage loan options. A conventional loan, for example, typically requires borrowers to pay anywhere from 5-20% down.
  • Your closing costs and fees are included in the loan in many cases. The FHA permits home sellers, builders and lenders to pay some of the borrower’s closing costs, which include appraisal, credit reports and/or title expenses.
  • Credit isn’t as much of a concern. While a mortgage lender will still want to review your credit score and history, it’s not as much of a contributing factor compared to other loans. The minimum credit score you should have to be considered for an FHA loan will actually vary, depending on the lender you work with.
  • You could refinance your current home, as well. These loans are not just for buying a property.
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With An FHA Loan:

  • The loan limits vary from state to state—even county to county. It’s not a one-size-fits-all system. On the FHA’s official website, you can easily find out the mortgage limits for your area. You also have the option of contacting a local lender for additional information.
  • You can assume the mortgage from a seller. Not all home loans are assumable, but FHA loans are. This means you are able to acquire a seller’s FHA loan when buying the property from him or her, which could be beneficial for both parties.
  • There is no longer a prepayment penalty, as of January 21, 2015. The updated regulation “allows mortgagees to charge interest only through the date the mortgage is paid, and prohibits the charging of interest beyond that date,” HUD explains.
  • Gifts are an “acceptable source of funds.” For such capital to be deemed a gift, “there must be no expected or implied repayment of the funds to the donor by the borrower,” as HUD describes. There are other stipulations to keep in mind, as well. You can learn more about them via the HUD official website or by contacting an FHA-approved lender.
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Additional information about FHA loans:

  • Two Mortgage Insurance Premiums are required on all FHA loans. The first is the upfront premium. The second is the annual premium. Contact your mortgage professional to learn more about these premiums and the current annual premiums for your loan amount.
  • Only properties that will be used as primary residences are eligible. This means investment properties and vacation homes wouldn’t qualify.
  • There are a wide range of property types you could receive an FHA loan for. These include both single- and multi-family homes, though there is a limit on the number of units. You can learn more about property restrictions via the HUD official website.

Contour Mortgage is an FHA-approved lender.

This means you can receive the aforementioned benefits directly if you qualify.

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To apply for an FHA loan, you must provide a lender with certain financial information documentation about yourself:

  • Employment history
  • Credit score
  • Bank statements (last two months)
  • Federal income taxes (last two years)
  • W2 statements (last two years)
  • Paystubs
  • Social security number
  • Divorce agreement
    (if applicable—highlights any other financial obligations you have, such as child support or spousal maintenance)

FHA also offers a special loan product designed to finance home repairs and improvements called a 203(k) loan.