The Federal Housing Authority (FHA) offers a variety of loan programs with fixed or adjustable interest rates. These home loans are attractive because they require very small down payments and gifts can be used for down payments and closing costs. These loans have qualifications that are more lenient than traditional mortgages and are a great option for first time home buyers.
Main advantages of FHA loans:
- Required down payment is only 3.5% of the purchase price
- Money for the down payment can be a gift to the home purchaser from outside sources
- Seller’s concession is up to 6% of home purchase price
- Bankruptcy or foreclosure does not necessarily disqualify a borrower
- FHA mortgage can be refinanced up to 97.75% of the value of the home
- Cash–out refinance is available up to 85% of the value of the home
FHA has permitted streamline refinances on FHA insured mortgages since the early 1980's. The term "streamline" refers to the reduced amount of documentation and underwriting that needs to be performed to receive loan approval, allowing you to complete the refinancing process in a shorter amount of time.