An Introduction To Different Types Of FHA Loans

FHA loans are a great option for first-time homebuyers because they allow people to purchase a home with just a 3.5% down payment. However, many different types of FHA loans can meet your specific needs and requirements – so you must understand the differences between them. This article will explain the different types of FHA loans, and how they work so you can get started on your search for your dream home!

Fixed Rate Loans 

Fixed-rate loans are a great choice for homeowners who want to know exactly how much they will pay each month. These loans usually have higher interest rates than adjustable-rate loans, but you don’t have to worry about your monthly payment changing over time. Fixed-rate loans are also a good choice for people who plan to stay in their homes for a long time and want certainty around their payments.

Adjustable Rate Loans

Adjustable rate loans are also available. These mortgages offer a fixed interest rate for a specified period, followed by an adjustable rate that may adjust monthly, quarterly, or annually. The interest rate may be tied to the prime rate or an index such as the consumer price index (CPI). This loan is more expensive than an ARM because it doesn’t allow you to lock in your low initial payments. 

FHA 245(a) Loan

The FHA 245(a) Loan is a loan for up to $2 million, and it’s designed for borrowers who want to purchase a home with little money down. The size of this loan is based on the purchase price of your home, so you’ll need to know what your budget will be when shopping around.

FHA Energy Efficient Mortgage

The FHA Energy Efficient Mortgage (EEM) loan program allows borrowers to finance energy-efficient home improvements, such as energy-efficient heating and cooling systems. The purpose of this program is to help you save money on your monthly utility bills while also helping the environment.

The EEM loans are available for homes that meet the following requirements:

• The property must be a single-family dwelling.
• You must occupy the property as your principal residence.

FHA Loans for Mobile Homes

Mobile homes are also eligible for FHA loans, which can be used to purchase, refinance, or improve homes. Mobile homes must be located on a permanent foundation, and the FHA must approve the park. Mobile home loans are not available for manufactured homes.

FHA Loans for Condos

You may have heard that FHA loans are only available for single-family homes. But this is not true. There are some situations where you can use an FHA loan to buy a condo—though you will need to meet certain requirements before you can do so.

The first thing you need to know about FHA condos is that not all condos are eligible for FHA financing. You see, the FHA does not allow condos to be purchased using their lending programs unless they meet a few specific criteria:

• The property must be owned by one person or entity (as opposed to being owned by multiple people), and the owner must occupy it. This means no rental properties are allowed!
• The condo must qualify as a “one unit” under local zoning laws in order for it to be considered eligible for FHA financing. Condos with more than four units cannot receive an FHA loan; however, if your condo has fewer than four units but would still count as a multi-dwelling unit in your state’s local zoning laws (like it does in California), then it will also not qualify for an FHA mortgage loan.

FHA 203(k)

A 203(k) loan is a federal mortgage loan that allows you to finance both the purchase of a home and the rehabilitation, repair, or improvement of that home. This type of loan is designed for buyers looking to purchase properties with significant repairs or improvements needed before they can be lived in. Since these projects can get expensive, potential borrowers need to understand how this lending option might help them meet their needs.