FHA Mortgage


New Jersey’s leading “low rate” FHA purchase and refinance mortgage lender for the past 31 years.  Not all lenders are the same, please read the following important information.

What is an FHA loan?

An FHA loan is a type of government-backed mortgage insured by the Federal Housing Administration, an agency of the U.S. Department of Housing and Urban Development. Borrowers pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.

Why people get FHA loans

Because of the government-backed mortgage insurance, The Loan Tree can — and does — offer FHA home loans at below current market interest rates and with less stringent and more flexible qualification requirements. In addition to lower minimum credit scores and lower down payments, FHA loans offer lower monthly mortgage payments to “less than perfect credit” borrowers when compared to a conventional mortgage.

Here are six facts that borrowers should know about FHA loans

  1. Less-than-perfect credit is OK

Minimum credit scores for FHA loans depend on the type of loan the borrower needs. To qualify for an FHA loan with a down payment as low as 3.5 percent, the borrower needs a credit score of 580 or higher.

Those with credit scores between 500 and 579 must make down payments of at least 10 percent.  People with credit scores under 500 generally are ineligible for FHA loans. The FHA will make allowances under certain circumstances for applicants who have what it calls “nontraditional credit history or insufficient credit” if they meet FHA requirements. Feel free to ask us if you qualify.

  1. Minimum down payment is 3.5%

Ready for a mortgage with a low down payment?  For most borrowers, the FHA requires a down payment of just 3.5% of the purchase price of the home. That’s a “huge attraction,” says Arthur Kelly, president of The Loan Tree due to the fact FHA borrowers can use their own savings to make the down payment. But other allowed sources of cash include a gift from a family member or a grant from a state or local government down-payment assistance program.

  1. Closing costs may be covered

The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an incentive for the borrower to buy a new home.  This is known as a seller concession.  Seller concessions can not exceed 6% of the contract sales price and are a useful tool to assist buyers with the necessary cash to close requirements.

The Loan Tree can also help our borrowers by providing “Lender Credits” up to $5,000 to pay for your closing costs.  Just ask us about this valuable benefit!

  1. Lender must be FHA-approved

Because the FHA is not a lender, but rather an insurer, borrowers need to apply for their loan through an FHA-approved lender such as The Loan Tree. Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan. Always remember that our FHA rates average .25% below than the national average. A lower rate for you translates into a lower monthly payment for you as well.

Costs, services and underwriting standards will vary among lenders or mortgage brokers.  That’s why so many borrower’s have selected The Loan Tree for their FHA mortgage needs as our rates and fees are among the lowest you can find in the mortgage industry.

  1. Two-part mortgage insurance

Two mortgage insurance premiums are required on all FHA loans: The upfront mortgage premium (UFMIP) is 1.75 percent of the loan amount — $1,750 for a $100,000 loan. This upfront premium is paid when the borrower closes the loan and is not required out-of-pocket as it can be financed as part of the total loan amount.

The second is called the monthly mortgage insurance premium (MIP).  The MIP varies somewhat based on the length of the loan, the loan amount and the initial loan-to-value ratio, or LTV. The above mentioned premiums are for FHA loans up to $756,600.

  1. You can borrow cash for repairs

The FHA 203K mortgage is a special loan product for borrowers who need extra cash to make repairs to their homes. The chief advantage of this type of loan is that the loan amount is not based on the current appraised value of the home, but on the projected value after the repairs are completed.

Why not call or email us for additional information at 732-988-5000 202 or akelly@theloantree.com. Or you can click here MORE INFORMATION and we will respond to your request as soon as possible.