Nuts and Bolts of an FHA Loan

The Federal Housing Administration (FHA) runs programs to promote home ownership.  To meet that end, the FHA guarantees that a lender will not have to write off a loan if the borrower defaults.  Consequently, lenders are willing to make the loans.  

Almost anyone can get the loan.  There are no income limits like other first time home buyer programs (great if, like us, you are self-employed).  To qualify a borrower just needs decent credit.  Additionally, a borrower can put down as little at 3%, unlike a conventional loan.

One major downside to FHA loans is that a borrower is limited to borrowing a relatively small amount.  The loan limits vary from county to county, ranging from $271,050 to 332,500 for a single family home.  The loan limit in Travis County is $288,750.

Additionally, the FHA requires a buyer to purchase an upfront mortgage insurance premium (MIP) of 1.5% and a small ongoing monthly fee.