The Basic Mortgage

FHA has several programs, but the FHA 203(b) is the most popular. This program calls for a three percent down payment, and it can be used to purchase single-unit or up to four-unit homes, including manufactured homes, in both urban and rural regions. Although first-time home buyers are encouraged to apply, FHA 203(b) mortgages are not limited to first-time buyers. To apply for an FHA 203(b) mortgage, apply directly with an FHA-approved lender in your area.

The FHA can be repaid over a period ranging from ten to 30 years, although it is possible to pay the mortgage off faster by making additional principal payments along with the regular monthly payment. There is no penalty for pre-payment. The interest rates are somewhat higher than that of a conventional mortgage. Closing costs can be included in the financed amount.

Although the borrower�s credit must be satisfactory, the credit requirements are not as stringent as the requirements for a conventional loan. The 203(b) mortgage is available anywhere in the United States. Although a home must meet minimum property standards, FHA also has a program for buying homes in need of rehabilitation. A FHA 203(k) mortgage can be used to buy and rehab a home.

The FHA basic mortgage is typically used for low- to moderately-priced homes. There is a limit on the size of mortgage that can be applied for, and this limit will vary depending on your region. The limit is lower than the limit for conventional, Ginnie Mae- or Fannie Mae-backed loans, so if you want a more expensive home, you may not qualify for an FHA mortgage.

The interest rate on an FHA basic mortgage is not fixed by the FHA; rather, it is set by each individual lender. Accordingly, it would be a good idea to compare rates between three or four FHA-approved lenders before applying. Nonetheless, you should expect the interest rate to be slightly higher than that of a conventional mortgage.