FHA Standard

An FHA Standard loan is a mortgage insured by the Federal Housing Administration (FHA), a federal agency of the United States Government established in 1934 to stabilize the U.S. mortgage market, improve housing conditions and standards, and provide an adequate home financing system. An FHA Standard loan helps people with lower incomes and credit scores become homeowners.

The FHA provides mortgage insurance to their approved lenders so that if a borrower defaults on their loan, the lender is reimbursed. The FHA does not directly offer loans.

Borrowers must pay a one-time upfront Mortgage Insurance Premium (MIP) rolled into the loan and an annual MIP divided by twelve and included in the monthly payments.
The premiums go into a fund that repays lenders if borrowers default. Mortgage insurance is required for the full term of FHA loans.

FHA loans are best for borrowers who are looking for a minimal down payment and who may have trouble getting approved elsewhere.

The basic qualification requirements for an FHA loan are as follows
– A Social Security Number (SSN)
– Appropriate age to qualify for a mortgage
– Two years of employment and income that will continue for the first three years of the mortgage
– Qualifying debt-to-income and mortgage payment-to-income ratios (varies based on credit score and compensating factors)
– A minimum credit score of 620
– Credit history (i.e., no recent bankruptcies, liens, unresolved delinquencies or collection accounts, recent foreclosures, etc.)
– Mortgage Insurance
– Taking title in their own name or in the name of a living trust
– Living in the property as your primary residence for two months and one year (there are exceptions)
– No delinquent federal tax or nontax debt
In addition, the home must meet the “Property Acceptability Criteria” and the loan must be under the FHA maximum limit for your area.

– Lower down payment requirements compared to Conventional mortgages
– Less stringent credit score requirements
– Ability to include closing costs in the mortgage

Many factors can affect the time it takes to close a loan. However, according to Ellie Mae, the average closing time for an FHA loan is approximately 50 days.

All FHA loans require borrowers to pay an upfront and annual mortgage insurance premium, regardless of the amount of their down payment. The annual premium continues for the life of the loan.
1. Upfront Mortgage Insurance Premium (UFMIP) 
The UFMIP is paid at the time of closing and is equal to 1.75% of the base loan amount. Note that it must be fully funded into the loan or fully paid in cash. The proceeds are placed in an escrow account set up by the U.S. Treasury to protect the government if the borrower defaults on the loan.
2. Annual Mortgage Insurance Premium (MIP) 
The MIP is due annually but can be paid monthly. The proceeds go to the FHA to cover the lender’s loss if the borrower defaults.

Mortgage insurance is required for an FHA loan to protect the government and the lender against losses. FHA loans provide greater access to homeownership by lowering credit and financial requirements. As a result, lenders face a higher risk. Mortgage insurance helps mitigate this risk.

Yes. HUD and the FHA allow borrowers to use gifts and assistance programs to get the funds needed for their down payment. However, the gift must be from an eligible person who does not have a financial interest in the transaction (i.e., family, a friend, an employer, etc.). The seller, builder, or real estate agent would not be an eligible gift giver. Further, the gift must be given without any expectation of repayment.

Yes, just like any other mortgage, an FHA loan can be refinanced. In addition, the FHA offers a streamlined program that makes refinancing very easy.

The maximum loan amount for an FHA loan varies by location because it is determined by the county loan limits. To find the maximum loan amount for an FHA loan in a specific area, you can visit the official website of the U.S. Department of Housing and Urban Development (HUD) and use the FHA Mortgage Limits Lookup tool, filter by a desired location and get the FHA mortgage limits.