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- Most traditional mortgage lenders require borrowers to put down at least 10 percent of a home's purchase price. FHA-insured loans, though, require a down payment of just 3.5 percent of this price. That can make a significant difference: On a $200,000 house, a 10-percent down payment comes in at $20,000. A 3.5-percent down payment on the same house costs borrowers just $7,000.
- Borrowers can only borrow so much with FHA-insured loans. These loan limits vary according to the location of the house. As of 2009, in Alameda County, California, the FHA loan limit stands at $729,750 for a single-family home. In Montgomery County, Alabama, the limit for a single-family home as of 2009 was $271,050. For a list of loan limits in your state, visit the U.S. Department of Housing and Urban Development website.
- Sellers can pay a larger percentage of a real estate deal's closing costs, which are usually borne by the buyers, under FHA-insured loans. With traditional mortgage loans, sellers are allowed to contribute up to 3 percent of a home's purchase price to the closing costs that buyers must pay. With FHA-insured loans, sellers can contribute as much as 6 percent of a home's closing costs. For a house that cost $200,000, sellers with an FHA-insured loan can contribute up to $12,000 for closing costs.
- When taking out an FHA-insured loan, borrowers must have monthly debt obligations, including their new estimated mortgage payment, that total no more than 43 percent of their gross monthly income. With traditional mortgage loans, borrowers must have monthly debt obligations, including the cost of their new mortgage loan, that total no more than 36 percent of their gross monthly income.
- FHA-insured loans do require that borrowers be able to verify their gross monthly income. They also require documentation, usually in the form of a letter from borrowers' employers, that borrowers have a stable source of income.
Low Down Payments
Loan Limits
Closing Costs
Debt-To-Income Ratio
Documentation
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