FHA Loan

An FHA loan is the loan that allows the least amount of down-payment. Currently a minimum of 3.5% of the purchase price is required from the borrower. That 3.5% is allowed to be a gift from a family member or employer. 100% of it is allowed to be a gift.

An FHA loan also has mortgage insurance. There is an up front fee that goes to FHA at closing. That fee is added to the loan amount at closing, it is not required to be paid by the borrower out of ones pocket, it is added to the loan amount. The fee is currently 1% of the loan amount.

Sellers are allowed to contribute to the closing costs of the buyers. Currently up to 6% of the purchase price can be paid by the seller, towards the buyers closing costs. It is fairly common for some closing costs to be paid by the seller at this time, even if the seller is a bank. They may not allow the full 6%.

FHA loans require a bit more paperwork and processing on the part of the person processing the loan, but that does not mean it is harder for the borrower.

FHA is the way to go for many home buyers today, especially with less down payment required.