Top 10 Things You Should Know About FHA Loans

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Most people know the Federal Housing Administration (FHA) loans as merely the mortgages backed by the Federal Housing Administration, and nothing more. What more do you know about the federally-backed loans? I guess not much. In a recent El Poder Es Ahora (The Power Is Now) show, Mortgage Spotlight segment hosted by Adriana Montes, we addressed a few important things you should know about FHA loans, as highlighted below.

  1. FHA loans are easy to qualify.

If you worry about whether you’re eligible to qualify for a mortgage, an FHA loan is the best option for you. The federally-backed loans are very easy to qualify for, simply because you don’t have to have perfect credit to qualify. Easy to qualify for FHA loans means that borrowers with a FICO score of 580 and above are only required to put a down payment of 3.5%. It also means that if you have an existing mortgage and you want to buy a new FHA home, or if you’re renting and you haven’t had more than late in the last 12 months, you can qualify for an FHA loan. In other words, you can qualify for an FHA loan if you have no mortgage lates, no rent lates in the last 12 months, no bankruptcies, no foreclosures in the previous three years, no open judgments, and tax liens.

However, if you have a FICO score of below 580, you can still qualify for an FHA loan with a very low-interest rate but with a 10% down payment.

  1. Low down payment.

You only need a 3.5% down payment to qualify for an FHA loan. However, the money you put on a down payment has to be traceable. The money has to be from a savings account or an investment account for at least the last two months. Lenders do not accept payment in cash or any untraceable form.

Additionally, the down payment can be from a friend or a family member. If you don’t have any money to put as a down payment, they can gift you the money in cash or equity.

  1. The seller can pay your closing costs.

Under FHA, the seller can pay up to 6% of the closing cost. This leaves you, the buyer, with just the down payment to pay. This is a game-changer for the real estate market since you can get the aid you need to finance your closing costs.

  1. FHA loans require mortgage insurance.

FHA loans require you to have mortgage insurance whenever you’re putting less than a 20% down payment. The mortgage insurance is meant to protect the lender in case you default on the loan. The insurance covers between 25%-30% of the loan amount, so the lender can recoup their losses and be able to sell the property in case you fail to pay.


  1. You can make home repairs with an FHA 203k loan.

The FHA 203k program allows you to buy a home, and if the home requires repairs, you can qualify to get a loan for buying and repairing the home all at once, instead of purchasing the home then having to come up with the money to repair the home later. There are two types of FHA 203k loans; standard and streamline.

A streamline 203k loan is for buyers who wish to buy a home that needs minor or cosmetic repairs such as floor and kitchen cabinets replacement, while a standard 203k loan is for a full rehab of the property.

  1. FHA loans are not just for first-time homebuyers.

FHA loans are perfect for first-time homebuyers due to their flexibility and low cost, but they aren’t limited to first-time homebuyers alone. The program aims to help all types of buyers. In other words, whether a first-time or a returning homebuyer, you can get an FHA loan.

Moreover, homeowners can purchase another property with an FHA loan, provided you make it your primary residence.

  1. FHA has the first-time homebuyer down payment assistance programs.

There are certain down payment assistance programs under cities, counties, finance authorities, or non-profit organizations that work with FHA. For example, there is Golden State Finance Authority and California Housing Finance Authority, which I highly recommend, that provides homebuyers with down payment and closing cost assistance in California. To get more information on all the counties and cities providing down payment assistance, kindly visit the HUD website.

  1. FHA has a refinancing program.

FHA has excellent refinance programs for its borrowers. If you already have an FHA loan, you can consider doing a streamline refinance. Before qualifying for FHA streamline refinance, you must have had that loan for at least 210 days and made at least seven payments.

  1. You can use an FHA loan to buy a multi-unit property.

Unlike other mortgage loans, FHA loans’ flexibility allows the purchase of multiple-unit properties. You can use an FHA loan to buy a two-, three-, and four-unit property. This is another game-changer, especially for the millennial homebuyers. FHA loans’ flexibility gives first-time homebuyers the ability to buy a multi-unit property.

When buying a multi-unit property, the lender takes 75% of the income from the other units of the property you’re about to purchase and add it to your income to qualify you. This makes it easier for buyers to qualify for a four-unit property than it is for a single-family property.

  1. You can have multiple FHA loans.

FHA can allow you to have more than one FHA loan. However, this happens under certain requirements. First, in case of divorce between a couple who bought their home with an FHA loan, the parting spouse can get another FHA loan to buy their own property. Another reason is in case you relocate to another place while you had acquired an FHA loan from the previous place. You can still get another FHA loan to get a house in the new place. Lastly, you can get another FHA loan if you have an unexpected increase in family size, which triggers the need for a bigger space.

You can watch the whole show on our YouTube channel here.

About The Power Is Now Media

The Power Is Now continues to keep you updated with the latest news in the real estate market as we strive for advocacy of homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. In this regard, we have a team of professional realtors— VIP Agents stationed nationwide to help you with anything you need in attaining your homeownership dreams. You can get in touch with the VIP Agents at If you can’t find an agent from your area, you can contact me directly for a referral. Also, ensure you stay updated with any developing real estate market news by regularly checking our blog page at You can also set up an appointment to speak directly to me at

Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Ph: 714- 475-8629.

Eric Lawrence Frazier MBA

President and CEO

The Power Is Now Media Inc.