What is a Fixed-Rate Mortgage Loan?

A traditional FHA mortgage loan is a loan provided by an FHA-approved lender – meaning the loans are insured by the Federal Housing Administration (FHA). These loans are designed for low-to-moderate income borrowers with less than perfect credit and can only afford a small down payment.

Some FHA mortgage loan requirements are more stringent than conventional requirements. FHA mortgages include an Upfront Mortgage Insurance Premium (UFMIP), which is 1.75% of the base loan amount. It is paid at the time of closing or rolled into your loan amount.

In addition, there is an annual Mortgage Insurance Premium, or MIP. The MIP is charged monthly, is included in your mortgage payment, and can range from 0.45% to 1.05% of the base loan amount.

Other Types of FHA loans

Home Equity Conversion Mortgage (HECM) – reverse mortgage

FHA 203K Program – includes extra funds to pay for home improvements

Energy Efficient Mortgage Program – includes extra funds to pay for energy-efficient home improvements

Section 245 (a) Loan – graduated payments that start off lower and increase over time or have scheduled principal payment increases that result in a shorter term

Who Should Consider an FHA Mortgage Loan?

Because the down payment and credit scores required are lower than those for most conventional loans, these loans work very well for individuals and families with low-to-moderate income. They are also beneficial for first-time home buyers with some down payment saved, or perhaps given as a gift from family or an employer. Your down payment can come from your savings, a gift from a family member, you can possibly borrow money from your 401K, or it can come from a grant.
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