If you go to the FHA official site to do some research on your FHA loan options, it can be a bit challenging to navigate the programs–there are a lot of different types of FHA loans to choose from including the 203(b), the 203(k), and many others. Some borrowers want to cut through all the names, acronyms, and jargon to learn about the FHA’s basic home loan program.
If you’re one of those people, know that the FHA 203(b) home loan program is the one you’re looking for. In the words of the Federal Housing Administration, the purpose of the FHA 203(b) loan is to “provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.”
You read that correctly–the FHA 203(b) loan includes a refinance option. What does a borrower need to be eligible to apply for the FHA 203(b)? According to the FHA official site,
- The borrower must meet standard FHA credit qualifications.
- The borrower is eligible for approximately 96.5% financing. The borrower is able to finance the upfront mortgage insurance premium into the mortgage. The borrower will also be responsible for paying an annual premium.
- Eligible properties are one-to-four unit structures.
- To learn more about the mortgage limits in your area, go here.
Borrowers can search for a lender, or go to FHALoan.com to pre-qualify for a home loan. (The FHALoan.com website is a private company, not a government agency.)
The basic rules for FHA home loans for single-family residences under the 203(b) program include the previously mentioned down payment, the borrower must intent to live in the home purchased with the FHA loan as the principle residence, and the property must be appraised by an FHA appraiser prior to loan approval.
If you’re looking for an FHA home loan, consider pre-qualifying–you’ll learn how much you can qualify to borrow, which saves money on the house hunt and helps you look for a suitable property in your price range.
Do you have a question about FHA home loans? Ask us in the comments section.