What is a “FHA Loan”? What are the parameters of these types of loans? In the world of real estate, there are a lot of acronyms and abbreviations, and we realized that there is some confusion or misunderstanding about FHA loans. Here is a simple breakdown, and current information pertaining to Missoula and Ravalli Counties in Montana.
“FHA” stands for “Federal Housing Administration.” The FHA is a mortgage insurer, who insures loans made by approved lenders. The FHA is not a bank and does not provide loans directly. Click here for more information about the way this government entity operates.
Here is some local information about obtaining a FHA loan in Missoula and Ravalli Counties, thanks to Bryon Smith of Bryon Smith Mortgage, here in Missoula, MT:
- Current Missoula County FHA loan limit: $291,250 / Current Ravalli County loan limit is $303,750
- Minimum credit score: 620
- 3.5% down-payment
- Must be for an owner-occupied purchase
- Can be used to purchase single family, duplex, tri-plex and four-plex (as long as it is owner-occupied)
- Can be used for a purchase of a manufactured home
- Allows for Seller-paid closing costs
- Allows a co-signer
- Requires that certain property conditions are met
- Requires mortgage insurance (an upfront cost, which is financed into the loan, and a monthly mortgage insurance charge)
- Upfront Cost – 1% of the loan amount
- Monthly mortgage insurance – 1.15% of the loan amount
Here is an example of how the mortgage insurance works with a hypothetical loan amount of $150,000:
- Upfront Mortgage Insurance = $150,000 x 1.5% = $151,500 (this is the amount financed)
- Monthly Mortgage Insurance = $151,500 x 1.15% = $1,742.25 / 12 months = $145.19 per month
While this is certainly not exhaustive, we hope it will help to clarify what a FHA loan is and how they work. Please contact us for specific questions, and also feel free to contact Bryon Smith with any financing questions. He can be reached at (406) 541-8100 or bsmith@blackfoot.net.