FHA Loans

An FHA loan is another common type of mortgage that is insured by the Federal Housing Administration (FHA). What this means for you is that the federal government insures loans for FHA approved lenders in order to reduce the lender’s risk of loss if a borrower defaults on their mortgage payments, leading to more favorable terms for homeowners.

The FHA program was created after an epidemic of foreclosures and defaults in the 1930s. The aim of the FHA was to provide mortgage lenders with a level of insurance in order to help stimulate the housing market by making loans more accessible and more affordable. In today’s times FHA loans are very popular, especially among the ranks of first-time home buyers.

Typically an FHA loan is one of the easiest types of mortgages to qualify for because it requires a low down payment and a borrower with less than perfect credit can easily qualify. A minimum down payment of at least 3.5% is required to obtain an FHA loan. Borrowers who cannot afford the traditional down payment of 20% (which is associated with a conventional loan) or cannot get approved for private mortgage insurance should look into whether an FHA loan is their best option. Another advantage of an FHA loan is that it can be assumable; meaning that if you sell your home the buyer can take over the existing loan if they qualify. People who have bad credit or have undergone a bankruptcy, foreclosure, or other credit issues may be able to still qualify for an FHA loan.

The following link will provide you with more detailed information directly from the U.S. Department of Housing and Urban Development.

http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home