In order to offer this insurance, private insurance companies establish guidelines that the borrower must meet in terms of allowable monthly debt, down payment amount and overall credit standing. But what makes FHA insurance more attractive than many other privately issued insurances is that borrowers are usually given more flexibility. Down payment requirements through FHA are often times lower as well. Another option is that FHA allows for the Family Money Rule. This rule states that the money used for both down payment and closing costs may come from a family member.
Borrowers also have the option to finance their closing costs into the mortgage loan.
Insurance costs through FHA are often times more expensive than most privately issued mortgage insurance. However, the money spent on this fee may be well spent if it is the borrower's only way to achieve homeownership. The main advantage lies in the fact that the FHA is usually more open to approving potential borrowers who may have had credit problems in the past, or those who have a limited credit history. Most first-time homeowners generally fall into one of these categories, which is why the FHA program is one of the most popular programs for such borrowers. Although there are no income restrictions on FHA-insured loans, borrowers are limited to the amount they can borrow.