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What is an FHA Loan?

what-is-an-fha-loan What is an FHA loan? This question draws back to the 1930s. The Federal Housing Administration (FHA) loan program was started in 1934 during the Fantastic Depression for the sake of U.S citizens -in a time when foreclosures were high and many people were defaulting on their mortgages. The FHA does not lend money; instead they insure your loans. Thus, what the FHA does is encouraging lenders to give low-to-middle income families or people with tattered credit score better terms and rates that they won’t be able to get otherwise. But, the lenders are free to set their terms and rates, but the FHA also give limits to help the borrower.

FHA loans open possibilities to Americans to buy a house they may not otherwise be able to afford. FHA loans were made to insure the lenders in case the borrowers default. At the time, some of the FHA loan programs were subsidized by the US government, but the long-term goal was to make the program self supporting based on the premiums paid by the borrowers.

What is exactly the FHA home loan? The FHA home loans are mortgages that are insured by the Federal Housing Administration, a United States government unit under the Housing and Urban Development (HUD). The FHA does not give loans but they insure the loans in case you default, so that the FHA approved commercial lenders could give you a better offer and rates which you won’t be having with a traditional one.

Later on in the years, private mortgage insurance companies came to fruition making the FHA a primary service for people who can’t afford a standard down payment or who do not qualify for private mortgage insurance.

In 2007, many borrowers were hurt by the subprime mortgage financial crisis, and on August 31 of that year, the FHA added FHA-Secure, a new refinancing program.

What can FHA loans give to you?

1) FHA loans could help you to buy your home, including first time homebuyers.

2) FHA loans could help you repair or renovate your current residential home. If you own a home that requires renovations, your FHA loan can refinance your current mortgage and include more funds for the costs of repairs all in one loan.

3) FHA loans could help you renovate your home into a better place on earth, say make it more energy efficient..? There is an energy efficiency loan offered by the FHA.

4) FHA loans could help you buy a mobile or manufactured homes, even those that are or will be located in mobile homes’ park.

What benefits can FHA loans offer to you?

1) Lower down payment requirements, as low as 3% of the home price.

2) Lower closing costs, and its majority can be included in the loan. It means you’ll have more money left when you close your deal.

3) You don’t have to have a excellent credit score to qualify -simpler qualification for mortgages based on credit.

4) You can consolidate your home-buying and your home-repair expenses into one loan.

5) For elderly 62+ years ancient who live in and own their home or have a low balance on their loan, the FHA offers a reverse mortgage to convert some of the equity built into the home into cash.

After reading this, I hope you’ll have more information about what is an FHA loan and what are their benefits for you. Find a nearby FHA-approved lender and try talk directly to them about your problems/ wants/ needs. Pleased hunting!

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