FHA Loans

Question 1

Does FHA purchase loans?

Answer 1

No, FHA insures loans by covering a lender’s loss in the event of a borrower’s default

Question 2

What is the minimum down payment for FHA loans?

Answer 2

3.5% of sales price

Question 3

Does FHA require mortgage insurance premium (MIP)?

Answer 3

Yes, upfront mortgage insurance premium (UFMIP) is paid at closing or financed into the loan and the annual MIP is paid monthly as a part of PITIA

Question 4

What is the housing expense ratio (HER) or front-end ratio for FHA?

Answer 4

31%

Question 5

What is the DTI ratio or back-end ratio for FHA?

Answer 5

43%

Question 6

Are FHA loans assumable?

Answer 6

Yes, the new borrower must meet the lender’s qualifying standards prior to assuming the loan

Question 7

What percentage of the lender’s loss does FHA insure if the borrower defaults?

Answer 7

100%

Question 8

For FHA, Is UFMIP refundable?

Answer 8

Yes, under the following conditions refinancing to another FHA loan within a 3-year period. The refund is prorated over a 3-year period.

Question 9

What is the max. contribution a seller can make towards closing costs in an FHA loan?

Answer 9

up to 6% of the sales price and nothing for seller can go towards down payment

Question 10

Is there a prepayment penalty for FHA loans?

Answer 10

No

Question 11

What is the FHA underwriting system?

Answer 11

Total Score Card which can be assessed via Fannie Mae DU and Freddie Mac LP underwriting systems.