FHA Loans are an incredibly popular option for first time homebuyers, because they offer low down payment options, low interest rates, and have flexible credit requirements. Many people don’t realize that there are multiple types of FHA loans, and there may be a better fit 

What is an FHA Loan? 

FHA loans are home loans backed by the Federal Housing Administration. FHA loans make home loans accessible to many people who wouldn’t be able to qualify for a traditional home loan. 

What are the Different Types of FHA Loans? 

A lot of people mistakenly believe there is only one kind of FHA loan, but really there are a wide variety! 

FHA Basic Home Mortgage Loan 203(b)

The basic home mortgage loan is the loan most people typically think of when FHA loans are mentioned. These are simple mortgages with all of the typical requirements of an FHA loan. 

FHA Rehabilitation Mortgage Insurance 203(k) Loan

FHA rehabilitation mortgage insurance 203(k) loans allow first time homebuyers and homeowners to finance a large amount of money (up to $35,000) into their mortgage to go towards the cost of repairs, improvements, or upgrades. This is a great option for people whose home inspectors or FHA appraisers find issues that need to be immediately fixed, or for homes that are offered at a steep discount due to their current condition. Things like paint, carpet, repairs, or a new air conditioning unit can be purchased with the additional funds. 

FHA Energy Efficient Mortgages 

FHA energy efficient mortgages (EEM) allow homeowners financing for energy saving equipment. Things typically financed with EEMs include solar panels, or wind technology.  

FHA Graduated Payment Mortgage 

If you expect your income to increase over the coming years, an FHA graduated payment mortgage is a good option. Mortgage payments increase 2% a year for 10 years, allowing you to start off with payments you can afford, that increase along with your income. 

FHA Condominium Mortgage 

To get an FHA condominium loan, you may have to meet even more requirements than the already strict basic FHA home loans. However, for people who are trying to buy a home in an urban area with a high cost of living, an FHA condominium loan is a great way to finance your mortgage if you don’t have a large down payment. 

FHA Adjustable Rate Mortgages

An adjustable rate mortgage (ARM) has an interest rate that changes through the duration of the loan. Adjustable rate mortgages have an extremely low initial interest rate, which is typically lower than the interest rate of a fixed rate mortgage. Adjustable rate mortgages can be a better option than a fixed rate mortgage if you don’t plan on owning your home for more than a few years, or if you expect your income to significantly increase in the near future.  

FHA Disaster Victims Mortgages 203(h)

If you have lost your home to a major natural disaster and are trying to purchase a new one, you may qualify for a disaster victims mortgage, with no down payment. Your home must be completely destroyed or severely damaged in a Presidentially declared disaster zone to qualify. 

FHA Hawaiian Home Lands

If you are a Native Hawaiian who wants to purchase a home on Hawaiian home lands, you may qualify for this special type of mortgage, with an increased line of credit. 

FHA HECM (Home Equity Conversion Mortgage) Seniors

HECM, or a home equity conversion mortgage, is also known as a “reverse mortgage.” This mortgage allows you to withdraw some of your home’s equity for living expenses, or to purchase a primary residence. Reverse mortgages are not generally recommended unless absolutely necessary. 

FHA Reservations and Other Restricted Lands (248)

This is a special type of loan that requires the approval of the tribe, for a home on tribal lands. If you wish to sell your home in the future, the buyer must also be approved by the tribe prior to the sale. You can also use this type of loan to build a home, but the plans must be approved by both the tribe and the FHA. 

FHA Manufactured Housing (Title I)

You may not realize that you can purchase manufactured housing and mobile homes with an FHA loan. Title I loans for manufactured housing also include financing for property improvement, as long as the manufactured home passes inspection and has been occupied at least 90 days. 

FHA Manufactured Home & Lot Combination

An FHA manufactured home and lot combination loan allows you to finance land alongside a new or used manufactured home. This option is often overlooked, but is a great idea if you find a land parcel that you couldn’t afford to build on otherwise. 

FHA Streamline Refinance

Streamline refinance is used when an existing FHA-insured mortgage needs to be refinanced, and it requires minimal credit checks and underwriting. There are options with and without required credit, so if your credit has improved significantly, you may request that they go more in-depth. 

FHA Title I Home Improvements

Some home improvement loans allow you to make improvements that may not be residential, but have a large impact on the livability of the property. Things such as a well, septic system, or connecting to utilities can be financed using this option. 

FHA Urban Renewal

In designated urban renewal areas, you may be able to qualify for this special type of FHA loan. FHA urban renewal loans are concentrated in areas where the government wants to improve, repair, or revitalize local housing. 

How Do I Know if an FHA Loan is Right for Me? 

If you have less than perfect credit, a small down payment, or a high debt-to-income ratio, FHA loans are a great option. If you have stellar credit, a sizable savings account and a low debt-to-income ratio, a conventional home loan may be a better option, so that you can save on the cost of mortgage insurance.