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Key Elements of FHA Loans

Here are key aspects of FHA loans you should know! 

FHA loans are insured by the Federal Housing Authority, a division of the Department of Housing and Urban Development.  This Federally insured program exists to extend more opportunities for affordable home ownership to low to moderate income families, as well as borrowers who may have “less than perfect” credit histories.

An FHA loan includes an Upfront or One-Time Mortgage Insurance Premium (MIP) which is added to the Base Loan amount to determine the Final Loan Amount. The Upfront MIP for all purchases and refinances is 1.00% regardless of LTV.

Additionally, there is a Monthly Mortgage Insurance Premium of 1.15% or 1.10% for loan terms greater than 15 years and 0.50% or 0.25% for loan terms 15 years or less. The Monthly Mortgage Insurance Premium is included in the PITI. Mortgage Insurance, both Upfront and Monthly is a requirement on every FHA loan, regardless of LTV.

The maximum Base Loan is determined by County and number of units.  FHA loans are available for 1-4 unit, owner occupied properties, including PUD’s and FHA Approved Condominiums.

Maximum Base Loan amounts for each State and County can be found on the HUD website by folloing this link:

The maximum Base Loan, per transaction, is determined by using the applicable LTV calculation determined by the Sales Price or Property Value, whichever is less.  In most cases, the maximum Base Loan LTV will be 97.00%.  If the loan applicant is paying for all of the loan closing costs, the Base Loan LTV may exceed 97.00%, according to the chart below:
Low Closing Cost States
  98.75% LTV - Property Value $50,000 or less
  97.65 % LTV - Property Value > $50,000-125,000
  97.15% LTV - Property Value over $125,000

High Closing Cost States
  98.75% LTV - Property Value $50,000 or less
  97.75% LTV - Property value over $50,000

**See the Mortgagee_Letter_2008-16 for the premium matrix and more details. **

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