federal housing administration (FHA) Loans

The Federal Housing Administration (FHA) runs several programs to promote home ownership. In most cases, FHA loans are mortgages obtained with the help of the FHA. With a small down payment, buyers can purchase a home. FHA loans make it easier for people to qualify for a mortgage, but they're not for everybody. Nevertheless, they are a great help to some borrowers. FHA loans allow people to buy a home with a down payment as small as 3.5%. Other loans might not allow such a low down payment.

*The following is only general information and will not apply to every person's situation. To learn how a FHA Loan could work specifically for you, call Equity Source Mortgage at 763-657-2000.

FHA Loan vs. conventional loan

FHA loans have surged in popularity over the last few decades. FHA loans are available in a variety of adjustable-rate and fixed-rate loan options. This type of loan requires borrowers to pay monthly and upfront FHA mortgage insurance premiums. Some FHA loans may even allow applicants to use a grant or gift to pay for closing costs. In addition to a variety of loan options and flexibility in contributions to closing costs, the benefits of an FHA loan include:

  • Offered to individuals of all income levels.
  • Allows for a new buyer to assume responsibility for the loan if you sell your home (subject to loan approval).
  • Grants reduced paperwork if applicants are eligible for an FHA Streamline Refinance.
  • Requires less cash upfront for a down payment than many conventional loans. Traditional loans on average require between 5 and 10 percent down before loans are approved. FHA loans require as little as 3 percent down. This will allow for more people to buy homes and start earning equity.
  • Applicants can qualify for FHA loans with a co-applicant even if they do not live inside in the home.
  • Lower Mortgage Insurance. Usually the monthly insurance fee paid for FHA loans are lower than fees paid on traditional mortgages.
  • Better Interest Rates. FHA loans are extremely competitive and give buyers with bad credit an opportunity to purchase a home. No matter what a home buyer's income level is, an FHA loan offers the exact same interest rate. Buyers are not penalized for credit scores later down the line. As long as they qualify for the loan, buyers get the current rate.
  • Flexible Credit History. Home buyers with little or no credit history are eligible to apply for FHA loans. Only one year of clean credit history is required. Conventional loans require two years of clean credit. Home buyers are also able to receive an FHA loan after 2 years of declaring bankruptcy, and three years after foreclosure.
  • High Seller Contributions. With FHA loans, home buyers can negotiate for sellers to pay all or most closing costs.
  • An applicant's credit history, income, and loan amount desires are factors that can affect whether or not homebuyers choose an FHA loan or a conventional loan. One substantial advantage of pursuing an FHA loan is that the loan limit can reach as high $729,750. This can be a great relief to homeowners who live in expensive regions. However, conventional loans are often capped at just $625,500.


Before pursuing an FHA loan or a conventional loan, be sure to confer with a certified home mortgage consultant to help you weigh all of your options like long-term and monthly costs. Despite the many advantages of FHA loans, conventional loans may be a cheaper or better long-term investment for some applicants.

Equity Source Mortgage

Equity Source Mortgage is the premiere home mortgage broker in the Minnesota. We believe that everyone deserves to experience the American dream through home ownership. Our mortgage consultants are experienced in every area of the home purchase process. Our number one goal is to find and secure the best loan for you and your family. Whether you are buying your first home, or need to refinance your current home, Equity Source Mortgage will find and secure the best rates for your mortgage loan. Contact us to begin your low stress mortgage experience with Equity Source Mortgage.

*The following is only general information and will not apply to every person's situation. To learn how a FHA Loan could work specifically for you, call Equity Source Mortgage at 763-657-2000.