The Federal Housing Administration (FHA) insures these type of home loans. The qualification guidelines are less restrictive and can be better suited for first time homebuyers or those buyers who also don’t have a lot of money for down payment or less than average credit. FHA loans are for financing a primary residence only.
· No prepayment penalty
· Lower than average credit scores ok
· Interest rates typically lower than conventional rates
· Low down payment (as low as 3.5% of purchase price)
· Borrower can use gift funds for down payment and closing costs