FHA Loan


FHA Loan

FHA Loan

An FHA Loan is considered to be a mortgage loan that is insured by the Federal Housing Administration. Basically, the federal government insures loans for FHA approved lenders in order to reduce their risk of loss if a borrower defaults on their FHA Loan mortgage payments. An FHA Loan program was started in the 1930’s in response to the rash of foreclosures and defaults that were happening at that time. The FHA Loan Program helps to provide mortgage lenders with sufficient insurance and helps to stimulate the housing market by making mortgage loans more manageable and affordable for the borrower.


An FHA Loan has some advantages and disadvantages. The main advantage of an FHA Loan is it is considered to be one of the easiest types of mortgage loans to qualify for because it allows the borrower to have a lower down payment and not so perfect credit. An FHA Loan requires you to have a 3.5 percent down payment. Another advantage of an FHA Loan is that the FHA Loan can be assumable if you want to sell your home meaning the buyer of your home can assume the current loan that you have. The disadvantages to an FHA Loan are since the FHA Loan does not have the strict standards of a conventional loan, a FHA Loan requires the borrower to have two kinds of mortgage insurance premiums, where one is paid up front or figured into the mortgage loan and the other is a monthly payment. An FHA Loan also requires that the house must meet certain criteria and be assessed by an FHA approved appraiser. If the home you are purchasing does not meet these certain standards and the seller will not agree to the repairs, then your only option is to pay for the repairs yourself at closing. Finally, An FHA Loan has maximum mortgage limits that will vary by your state or county, so you will want to research what are the FHA Loan limits in your area before you decide if an FHA Loan is right for you.