Federal Housing Administration Loan (FHA)

This program is a government insured loan that came into being in 1934.  FHA insures mortgages on single family and multifamily homes including manufactured homes.  FHA doesn’t lend money but provides lenders with mortgage insurance protection against losses.  Approved lenders underwrite the loan to FHA guidelines.   Upfront MIP is usually added to the loan amount and is 1.75% (can change) of the loan.  Monthly mortgage insurance (MI) is collected with the mortgage payment.  FHA loan amount limits for El Paso County for a 1 living-unit property is $356,500

The advantages to using the FHA program:

1.       Low down payment requirement.  Currently 3.5%.

2.       Closing costs can be paid by the seller, builder, agent, or gifted by a relative.

3.       Down payment can be gifted by a relative

Property condition requirements are a bit more difficult than that of a conventional mortgage.  An approved FHA appraiser will determine if the property meets the minimum FHA standards.  This appraisal inspection is not a home inspection and is very limited in nature.  If the property is in poor condition, the seller may not want to accept an FHA offer since the minimum condition requirement will come into play and require that the property be brought up to that minimum standard.  The buyer can back out of the transaction if the seller will not make the necessary repairs.  This weakens the offer upfront on houses that need work.  I will help you determine if the property meets the standards with the best educated overview I can make (without being an inspector).