Mortgage Dictionary
FHA Loan Terms:
Plain-English definitions for FHA borrowers.
6 plain-English definitions, server-rendered, free for everyone.
FHA Loan Mortgage Terms Glossary
What is the fha loan terms glossary for?
This FHA loan glossary defines the terms borrowers encounter when applying for an FHA-insured mortgage. From upfront and annual mortgage insurance premiums to HUD property standards and FHA loan limits, every definition is written in plain English with no jargon.
FHA Loan Mortgage Terms Glossary
- Assumable Loan
- A mortgage that can be transferred from the current owner to a qualified buyer, who takes over the existing loan terms including the interest rate. VA and FHA loans are generally assumable with lender approval. In a high-rate environment, an assumable loan at a lower rate can be a significant advantage for a buyer.
- Assumption
- The process by which a buyer takes over the seller's existing mortgage, including its remaining balance, interest rate, and terms. Requires lender approval and a qualification review of the new borrower. If approved, the original borrower is typically released from liability. If not released, the original borrower remains responsible if the new borrower defaults.
- FHA Loan
- A mortgage insured by the Federal Housing Administration. Designed for borrowers with lower credit scores or smaller down payments. Requires 3.5% down with 580+ credit. Requires mortgage insurance premium (MIP) for the life of the loan in most cases.
- Government Mortgage
- A mortgage insured or guaranteed by a federal agency: FHA (Federal Housing Administration), VA (Department of Veterans Affairs), or USDA (Rural Housing Service). Government mortgages allow lenders to offer terms not available on conventional loans, such as lower down payments, more flexible credit requirements, and no PMI. The government guarantee protects the lender, not the borrower.
- Insured Mortgage
- A mortgage backed by government insurance that compensates the lender if the borrower defaults. FHA mortgages are insured by the Federal Housing Administration. VA mortgages are guaranteed (not insured) by the Department of Veterans Affairs. USDA mortgages are guaranteed by the Rural Housing Service. Insurance allows lenders to offer more favorable terms than conventional uninsured loans.
- Loan Assumption Fee
- A fee charged by the lender when a qualified buyer assumes an existing mortgage. VA and FHA loans are assumable with lender approval. The assumption fee covers the cost of qualifying the new borrower and processing the assumption. Typically much less than standard origination fees on a new loan. The original borrower should obtain a release of liability from the VA or FHA after a successful assumption.
Frequently asked questions
What is MIP on an FHA loan?
MIP is the Mortgage Insurance Premium charged on all FHA loans. It has two parts: an upfront premium (UFMIP) of 1.75% of the loan amount, usually financed into the loan, and an annual premium paid monthly that ranges from 0.15% to 0.75% depending on loan-to-value and term. On most FHA loans with less than 10% down, MIP lasts the life of the loan.
How is UFMIP different from MIP?
UFMIP is the one-time Upfront Mortgage Insurance Premium charged when an FHA loan closes (1.75% of the loan amount). MIP is the recurring annual premium collected monthly with the mortgage payment. UFMIP is typically rolled into the loan balance; MIP is paid for as long as the loan is outstanding on most FHA loans with less than 10% down.
What does HUD do for FHA loans?
The Department of Housing and Urban Development (HUD) oversees the FHA program. HUD sets and enforces the rules for FHA-insured loans: credit minimums, debt-to-income limits, loan amount ceilings by county, property condition standards, and appraiser requirements. Lenders that originate FHA loans must follow HUD guidelines or risk losing FHA approval.
Can I cancel FHA mortgage insurance like PMI?
On most FHA loans originated after June 2013 with less than 10% down, MIP cannot be cancelled by reaching 20% equity. It lasts the life of the loan. The only common way to remove MIP is to refinance into a conventional loan once enough equity is built up. Loans with 10%+ down can drop MIP after 11 years.
See all mortgage terms
The full dictionary covers 382 terms across every loan type and stage of the homebuying process.