What Is an FHA Loan?
If you’ve been in the market for a new home and have been shopping for mortgages, you’ve likely heard of FHA loans. You’ve probably also heard of the much lower down payment requirements and the low interest rates that are key selling points for FHA-backed mortgages. If you are considering going down the route of an FHA mortgage, it’s important you understand exactly how it works.
About FHA Loans
Simply put, an FHA loan is one that is issued by an FHA-approved lender and insured by the Federal Housing Administration. With a lower minimum down payment and credit score requirements, these loans are intended for low- to moderate-income borrowers who could not otherwise afford a conventional mortgage (one that is not backed by the government).
Understand that the FHA is not actually financing your loan, rather it is insuring the mortgage so your lender is protected in case you are unable to pay back what you owe. The chance of this happening is higher since FHA many of the eligible applicants can be considered high risk borrowers. That’s why the FHA mandates that all borrowers pay a Mortgage Insurance Premiums. These funds are how the agency backs the loans and operates with self-generated income.
About the FHA
IThe Federal Housing Administration, commonly known as FHA, is a government agency created in the 1930s, designed to help include more Americans in the housing market. It operates as a part of HUD, the U.S. Department of Housing and Urban Development. Over the years, the FHA has provided economic stimulation to the country in the form of home and community development. Starting in the 1940s when the agency helped finance homes for veterans returning, till the financial crisis of 2008 when it provided access to mortgage credit when the capital markets had seized up.
Loan Estimate and Closing Disclosure
The FHA's purpose has always been to stimulate the housing industry in the U.S., and in doing so it has benefited local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue.
FHA Loan Articles
August 14, 2023FHA loans typically require a minimum down payment of 3.5% of the purchase price of the home with the right credit score. This means that if you're buying a house for $240,000, you would need to make a down payment of at least $8,400.
August 10, 2023FHA loans have specific rules and requirements for borrowers who have filed for bankruptcy. The guidelines can change over time, so it's essential to consult with a qualified lender or FHA-approved counselor for the most up-to-date information.
August 3, 2023FHA loans are primarily designed to help individuals and families purchase homes for use as their primary residences. Rules for these loans generally discourage their use for investment properties or rentals. However, there are exceptions that come with strict rules.
July 29, 2023One crucial aspect of FHA loans that borrowers need to understand thoroughly is debt ratios. In this article, we look at how they can impact your ability to secure financing for your dream home. Debt ratios help lenders understand a borrower's creditworthiness and any risks associated with the loan.
July 21, 2023Investing in a multi-unit property can be an excellent way to build wealth through rental income and property appreciation. FHA multi-unit property loans make this opportunity more accessible to a broader range of individuals. You must occupy a unit as your primary residence within 60 days of closing the loan.
July 15, 2023To qualify for an FHA loan, you must meet certain employment requirements. In this article, we'll dig into the FHA loan employment requirements so that you can understand what's needed to get approved for this type of mortgage.
