FHA Home Loans 101

Most Americans have little experience with financing a home, and even fewer have specific knowledge of an FHA Loan, versus various conventional loans. The initials FHA represent the Federal Housing Administration. This government corporation was established in 1934 for the sole purpose of helping Americans fulfill their dreams of home ownership.

A lot of hard working people, dream of owning a family home but simply don’t qualify for the loan or can’t afford the purchase with a conventional bank loan. The FHA is helpful because it caters to people who cannot afford a conventional bank down payment or otherwise do not qualify for PMI insurance. Through an FHA home purchase, the down payment may be as low as just 3% of the total purchase price. Plus most of the closing costs and fees can be included in the FHA backed loan.

The FHA does not extend the actual loan, but rather it insures the loan. Your local private bank may be the actual lender, but that loan if further backed by the FHA, which allows the bank to offer more advantageous terms. Since the rate and terms are set by the actual lender and not the FHA, comparison shopping for the loan is very important.

Some of the more beneficial features of an FHA Loan are the terms which allow a single or multi-parent household to purchase a home. The FHA Loan can also provide options for fixing up your existing home such as remodelling, home repairs or energy-efficient improvements and including the additional renovation costs in the loan. The FHA has provided some excellent avenues middle income or low income Americans.

Traditionally, FHA loans have gone to lower income Americans and have enabled many families to purchase a home they would not otherwise have been able to afford. After all, this program did originate during the time of the great depression when foreclosures were common, and cash was scarce.

Today, the FHA is a part of HUD U.S. Department of Housing and Urban Development. FHA loans typically offer low down payments, low closing costs and easy credit qualifying.

Important to the mortgage lending process, the potential lender assesses the prospective home buyer for risk. That analysis of the home buyer’s debt to income ratio enables the buyer to know what priced home they can afford. Other factors, such as payment history on existing debts, are considered and used to make decisions regarding eligibility and terms for a loan.

The FHA even offers a Reverse Mortgage. If you are at least 62 years old and live in your home which is paid off then the FHA Reverse Mortgage might be right for you. An FHA Reverse Mortgage allows you to take equity out of your home. It allows the home owner to turn his equity into monthly cash for living. In August of 2007, the FHA even added a new refinancing program to help borrowers hurt by the 2007 subprime mortgage crisis. That refinancing program is called FHA-Secure.

Want to experience the joy of home ownership but need a loan? The Federal Housing Administration has been helping people fulfill their dreams of owning a home since 1934. For more information on the this topic you can visit FHA Mortgage Limits page. This page allows you to look up the FHA mortgage limits for your area or several areas, and then list them by state, county, or Metropolitan Statistical Area. You can also learn more at FHA Loan Refinancing.

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