March 17, 2022
How many different FHA home loans are there? Some people assume there is only one loan program addressing a variety of different housing types. In many cases that is true.
The FHA 203(b) loan is offered for a variety of different home loans including one-to-four unit homes that you would find in a typical suburban area.
But that loan can also be used to purchase a condominium unit, a townhouse, duplex, or mixed-use properties which are primarily residential. Some borrowers want to know if they can use an FHA 203(b) mortgage to purchase a manufactured home or modular home.
FHA loans under the 203(b) program are also known as Title II mortgages. The FHA home loan you need to purchase a manufactured home is called a Title I mortgage.
FHA loan rules say of Title I mortgages, “FHA approved lenders make loans from their own funds to eligible borrowers to finance the purchase or refinance of a manufactured home and/or lot.”
FHA Title I loans are generally offered for 20 years, which is different than the FHA 15-year and 30-year loan options offered with FHA 203(b) mortgages described above.
What other FHA home loan types are available? One option is known as the FHA 203(k) Rehabilitation mortgage, which is offered as both a purchase loan and a refinance loan. Some mortgage blogs erroneously lump FHA Construction Loans under the 203(k) heading but the two loans are quite different.
An FHA Construction Loan is offered under the FHA 203(b) program and is meant to help a borrower build a brand new home from the ground up. An FHA 203(k) Rehabilitation Loan is meant for structures a year old or more, and the HUD official site describes the loan as follows:
“A portion of the loan proceeds is used to pay the seller, or, if a refinance, to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed.” FHA loan rules say that for a standard 203(k) loan, the price tag for the rehabilitation must be at least $5,000.
There are also “limited” versions of the 203(k) loan with no minimum cost but with a cap on the total loan amount.
For all these home loan types, there are some standard features. One is that you cannot be penalized for paying the loan off early.
Another is that you have the option of adding an Energy Efficient Mortgage package to any of these FHA loans. That add-on to your home loan provides extra loan funds for approved energy-saving upgrades to the property.
All of these loans have standard downpayment requirements (3.5% minimum down) and all require mortgage insurance and the payment of an Up-Front Mortgage Insurance Premium. FHA loans do not have income caps and are not need-based mortgages.
Any financially qualified applicant may apply for an FHA mortgage, and borrowers who need down payment assistance may be able to get help from a state or local agency offering a program in that housing market.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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