A Federal Housing Administration insured loan, known as an FHA loan, allows a first-time home buyer to purchase a home with less than a 3% down payment. These loans are geared to lower the barrier-of-entry for first-time home buyers who would otherwise not be able to afford a large down payment on a home.
FHA Loan Requirements
Not every home buyer will qualify for an FHA loan. Generally, one needs to have 2 years of steady employment history, no recent bankruptcies, a stable credit history, no recent foreclosures, and enough income to afford the loan.
Because FHA loans have strict guidelines about the property that can be purchased, additional fees, and monthly mortgage insurance premiums, they may not be the best choice for a particular home buyer. If one qualifies for a conventional mortgage, then that may be a better option than an FHA loan. Currently FHA loans make up around 5% of mortgages in the US.
FHA Loan Limits
An FHA loan is limited to a certain amount. The maximum loan amount depends on the county where the home is being bought. You can look up the FHA loan limit for your county at HUD’s FHA Mortgage Limits page. Simply select your state and type in your county then click Send. On the results page you’ll find the loan limit under the One-Family column if you’re planning on purchasing a single family dwelling.
