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
April 23, 2021No matter what kind of market you’re in, it is always best to get pre-approved before going to shop for houses. The last thing you want is to go look at homes, find the one you love, then have to wait on an approval and lose the dream home to another buyer.
April 11, 2021With the trend of falling interest rates since 2019, the number of mortgage refinances around the country has spiked and continues to rise. Borrowers with FHA loans can also capitalize on the low rates, but it may be possible to simplify the process with the FHA Streamline Refinance.
March 29, 2021The FHA helps first-time and low-income homebuyers by having lower down payment requirements for its borrowers. Despite this lower credit eligibility criteria set by FHA, it is important to remember that FHA-approved lenders can set their own requirements
March 24, 2021One of the major arguments people have for renting instead of buying is the large upfront cost of a down payment. Depending on the type of loan program you apply and are approved for, this could mean anything between 3.5% and 20% percent of your purchase price.
March 21, 2021The two basic types of home loans are fixed rate and adjustable-rate mortgages. The mortgage market offers many other options to homebuyers, but these two are the most common, and the first pair from which to pick.
March 15, 2021A key step in the mortgage process is the home appraisal. In the case of home purchase or refinance, this is a task that is almost always required by the lender, and it is important that potential homebuyers understand what, how, and why of a home appraisal.
