FHA (Federal Housing Administration) Loan Program
Great Midwest Bank offers the popular FHA product for those buyers looking for more flexibility.
Features and benefits include:
• A low down payment option of 3.5% of the purchase price, which can be fully gifted, generally from family members. This gift alternative is one significant difference between the FHA and Conventional options.
• Mortgage Insurance (MI) paid both up front (typically 1% of the loan amount, which can be financed) and on a monthly basis. Monthly MI (generally 1.15% of the loan amount annually, 1/12th of which is paid monthly) payments are often higher for FHA.
• Greater flexibility in underwriting and approval. Generally speaking, when compared to Conventional and the WHEDA First Time Buyer program, FHA allows for lower credit scores, shorter (or more limited) credit histories and a higher debt-to-income ratio, which allows you to increase your spending power. Additionally, the FHA program does not generally require reserves as other programs might.
Comparable interest rates and higher costs than Conventional loans. FHA does allow outside parties to contribute towards closing costs and prepaid items like property insurance, interest, taxes, and insurance.