What is an FHA Mortgage Loan?
If you have been looking for a mortgage loan you may have seen
or been offered a FHA mortgage loan. So just what is an FHA mortgage
loan and what type of borrower is it appropriate for?
FHA stands for Federal Housing Authority which is a division of
the department of Housing and Urban Development (HUD). The FHA is
in charge of administering various federal housing programs, one
of which is the FHA mortgage loan program.
An FHA loan is a regular mortgage loan that the Federal Housing
Administration insures on behalf of the borrower against a default
on the loan. Lenders who issue mortgages through the FHA program
have that additional degree of protection and as a result are more
likely to issue a mortgage loan. What this means to you is that
an FHA mortgage loan can be easier to get than a conventional loan.
The good news doesn't stop there. FHA mortgages feature additional
money saving benefits for borrowers. Most conventional mortgage
loans require a sizable deposit, sometimes as high as 10 - 15 percent
of the purchase price. Ouch! With an FHA mortgage loan, downpayment
requirements are much lower - as low as just 3%.
An FHA loan carries no prepayment penalty, so if you are in a position
to pay off your mortgage early you won't face fees and penalties
for it. All lenders that participate in the FHA program are required
to keep the origination fees at less than one percent of the loan
value. This also will save you money and keep closing costs down.
Speaking of closing costs, the FHA can help finance your closing
costs and they offer mortgage insurance as well.
All of these benefits have made FHA mortgage loans a very attractive
option for many borrowers. The FHA mortgage loan program has helped
thousands of low to mid income households achieve their dreams of
homeownership. Since the beginning of the program (in the 1930's),
the FHA has insured over 33 million home mortgages. At the current
time, there are over 800,000 homeowners enrolled in this program.
An FHA mortgage is ideally suited to low to middle income households
and was designed to help people in this income bracket qualify for
a home loan and enjoy the benefits of home ownership.
In order to be enrolled in the FHA program, borrowers do need to
meet certain criteria and apply for the loan through an FHA approved
lender. The basic guidelines for participating in an FHA mortgage
require the borrower to have a good credit history, enough funds
for at least a 3% down payment and your total housing costs can
not be in excess of 29% of your gross monthly income.
The specific requirements will vary depending on where you are
looking to purchase a home. Your lender should be able to give you
the exact requirements for your area. There are many FHA approved
lenders and you are wise to shop around for the best rates.
If an FHA mortgage sounds right for you, you can speak to an FHA
approved lender for more information and to start the application