How FHA Loans Work

What is an FHA Loan?

Many people in Colorado hoping to qualify for a home loan in Colorado turn to FHA insured loan programs. An FHA loan is a mortgage insured by the Federal Housing Administration. This means you’re considered a less risky borrower than someone who doesn’t have the backing of the federal government. Borrowers with FHA loans also pay for mortgage insurance, which protects the lender from loss if the borrower defaults on the loan.

Fairway Independent Mortgage Corporation offers FHA loans at attractive interest rates with less stringent and more flexible qualification requirements than other mortgage types. Our role is to make sure that you qualify for an FHA mortgage and structure our loan to reflect it. Those who typically benefit most from an FHA loan are first-time homebuyers, those who have less than perfect credit and repeat buyers who have lost equity in the housing market.


FHA Loan Benefits

FHA loans provide a number of clear benefits to borrowers who would be otherwise have difficulty securing a loan to buy a home these include:

  • Easier Qualifications. Because the government backs the loan, qualifications are less stringent, meaning you’re more likely to receive approval.
  • Low Down Payment. For most borrowers, the FHA requires a down payment of only 3.5 percent of the home’s purchase price. In addition to using savings to make the down payment, FHA borrowers are allow other sources of cash, including gifts from family members or a grants from state or local government down-payment assistance programs.
  • Qualify with a Lower Credit Score. Those with a less-than-perfect or even a poor credit history can obtain an FHA loan. To get a mortgage with a down payment as low as 3.5 percent, borrowers need a credit score of 580 or higher. Those with credit scores between 500 and 579 must make down payments of at least 10 percent.
  • Better Interest Rates. U.S. government backing typically gives FHA loans better interest rates than most traditional mortgage loans.
  • Closing Costs May Be Covered. The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, including appraisal, credit report or title expenses.
  • Better Home Stability. The FHA has programs designed to help owners keep their homes during hard times and avoid falling into foreclosure. Notify your lender


FHA Qualifications

Although FHA loans have fewer restrictions than other types of mortgages, you must meet basic qualifications to obtain a loan through Fairway Independent Mortgage Corporation. These include:

  • Proven employment status for at least two years
  • Steady or increasing income over a two-year period
  • History of on-time payments, with no more than two missed payments on your credit
  • If you have filed for bankruptcy, you must wait at least two years before applying and have good credit since you filed
  • A minimum of three years since filing for foreclosure
  • Monthly mortgage payment should be approximately 30% of your gross income
  • Have a down payment of at least 3.5%
  • Agree to 2.25% in closing costs
  • Property must be your primary residence
  • Only single-family homes, condominiums, double-wide manufactured homes modular homes and 2-4 unit properties are eligible

FHA Loan Checklist

When applying for an FHA loan, having the following documents will help expedite the process. Don’t hesitate to contact us if you don’t understand any part of the FHA loan process.


  • Completed tax returns for the past two years
  • W-2, 1099 and other necessary tax forms from the past two years
  • Pay stubs from the previous month
  • If self-employed, three years of ta returns and YTD profit-and-loss statement


  • Last three months of statement for all bank accounts
  • Recent statements from investment accounts such as retirement, 401k, mutual funds, etc.


  • Driver’s license or other official state identification
  • Social Security card
  • Divorce, palimony and alimony documents, if applicable
  • Green card or work permit, if applicable

If you have questions about what type of documentation you need to apply for an FHA loan, call us at 720-500-1871.


What is an FHA Streamline Refinance?

Borrows who already have an FHA mortgage may qualify for an FHA Streamline Refinance, which is a great way to reduce interest rate, reduce monthly payment or even both.

Refinance Facts

  • No appraisal required as the FHA will allow you to use your home’s original purchase price as it’s current value
  • Refinance even if your owe more than your home is worth
  • No FHA prepayment penalty
  • Streamline refinancing rates are the same as regular FHA loan rates
  • Employment verification not required
  • Credit verification is not required as your payment history is used to determine qualification. You must have no late payments within the last 90 days and one or fewer late payments in the last 12 months

The Refinance Must Have a Purpose

Streamline Refinance applicants must demonstrate that there is a legitimate reason for refinancing such as changing from an Adjustable Rate Mortgage to a Fixed Rate Loan or reducing the total of principal + interest + mortgage insurance five percent or more.

Loan Balance May Not Increase to Cover New Loan Costs

The FHA prohibits increasing a Streamline Refinance loan balance to cover associated loan charge. Only the cost of the Upfront Mortgage Insurance Premium can increase the new loan balance. All other costs, including origination charges, title changes and escrow, must be paid as cash at closing by the borrower, or credited by the loan officer in full.


Common Questions About FHA Loans

What is the FHA?

FHA stands for the Federal Housing Administration, an agency of the U.S. government created in 1934 to help Americans get into homes.

Where can I find FHA forms and other literature?

A great source for FHA forms and information is

What is the FHA loan limit in my area?

The loan limit across the country is different.  Click here to see limits in your area.

Can an FHA loan help me lower energy costs?Yes. Through the Energy Efficient Mortgage Program you can finance 100 percent of the cost of making your home more energy efficient.

Are FHA loans assumable?

Absolutely. You can assume an existing FHA loan or allow a buyer to assume yours.

Will I have to pay mortgage insurance with an FHA loan?

FHA mortgages require you to carry mortgage insurance, often for longer than most conventional loans.



Scott Bakay

NMLS: 1177247
Phone: 303-501-6687

Fairway Independent Mortgage Corporation

8480 E. Orchard Rd #2100
Greenwood Village, Colorado 80111
Phone: 720-500-1871
eFax: 866-526-2397
Fairway Independent Mortgage Corporation (NMLS# 2289)
Complaints may be directed to:
(877) 699-0353 or Email us: