Start by comparing the latest FHA interest rates here.
| FHA Loan | 30-Year Fixed Loan | |
|---|---|---|
| House price | $220,000 | $220,000 |
| Loan amount* | $199,980 | $198,000 |
| Interest rate | 4.5% | 4.875% |
| Principal + interest | $1,013 | $1,048 |
| Mortgage insurance | $182 | $102 |
| Total monthly payment | $1,195 | $1,150 |
Benefits of FHA Loans
FHA loans have low down-payment requirements. FHA borrowers can put as low as 3.5% of the purchase price down.
First-time home buyers and those who have not owned a home in at least three years or more may qualify for FHA mortgages.
FHA also offers financing for mobile homes and factory-built homes. Additionally, there are loan products to accommodate people who own the land where the home will be located and those who will live in a mobile home park.
Buyers who want to lock in a low rate but don’t have a large down payment might find that an FHA mortgage is the best option for them.
Drawbacks of FHA Loans
The biggest drawback of an FHA loan are the insurance premiums. Borrowers are required to pay two types of mortgage insurance: mortgage insurance premium (MIP) and an annual premium.
These costs may vary. The MIP is roughly 1.75% of the loan amount while the annual premium is usually 0.85% of the loan. On a $100,000 loan that’s $1,750 up front and $850 each year you have the loan. Both of these costs can be rolled into the loan, which will show up in bigger monthly payments and more principal owed.
How to get approved for an FHA loan
To obtain approval for an FHA loan, the borrower must satisfy the following requirements:
- Steady employment history
- Ability to pay
- Financial soundness
- Residency
For more information on FHA loans:
Read more details on FHA loan requirements and find out the facts about FHA loans.
Be sure to compare FHA loan rates to get the best deal. FHA loan rates can be lower than conventional loan rates like the 30-year fixed, but they can end up being more expensive due to mortgage insurance costs.
Mortgage loans with less than 20% down generally have to carry mortgage insurance, but the insurance on FHA loans is more expensive than insurance on conventional loans. In addition, FHA borrowers are charged an upfront fee of 1% of the total loan that often is added to the total amount borrowed.