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There is a low down payment requirement.
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The entire down payment can be gifted or borrowed from a relative.
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Unlike conventional loans, there are no reserve requirements of two months' PITI payments at closing.
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Loan rates are typically lower than for market-rate conventional fixed-rate loans.
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A seller or other third party is allowed to participate in paying the buyer's closing cost.
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Loans originated prior to December 1, 1986, are simply assumable, meaning that the purchaser does not need to formally qualify. Other FHA loans are assumable with qualifying.
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Loans are assumed at the note rate under which they were originated, with the exception of FHA ARMs, which are assumed at the loan's current rate of interest.
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FHA loans have no prepayment penalty when the loan is retired (if FHA is given a 30-day notice to prepay).
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Because a new FHA loan pays off existing encumbrances, the seller receives all of his or her equity, less costs of the sale.
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Qualifying guidelines assist the average buyer in the marketplace; some underwriting guidelines are less restrictive than those of conventional fixed-rate loans.
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The lender is insured against loss for the life of the FHA loan.
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It is possible to place subsequent mortgages after an FHA first mortgage. New financing could even be placed around and FHA mortgage originated before December 1, 1986.
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A second mortgage can be initiated simultaneously with a new FHA first mortgage.
