What is an FHA Loan? FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal.
What is an FHA Loan?
- Low down payments
- Low closing costs
- Easy credit qualifying
The Federal Housing Administration (FHA) (Mortgage loans) promotes home loans to market buying homeowners. These kind of packages are generally popular simply because they let consumers purchase a house with little to no money down with flexible credit requirements.
What is an FHA Mortgage Loan?
When a consumer purchases real estate and takes a loan out in order to secure the property a mortgage(promissory note) is created- A promise to repay the loan. The loan is made by a creditor to the consumer. The FHA insures the loan to the lender in the event of default the lender will be indemnified for their losses. As a result it allows the lender to feel more comfortable to make the loan.
From the FHA insuring the loan this allows more lenient loan requirements and more opportunities for people to own a home. For example, a person could buy a home with $0 Down or just 3.5% down as opposed to putting 20% down if they went to a bank to get a loan. Also, with the FHA, the closing costs can be paid by the seller or put into the loan. Even if the property needs repairs you can get cash back to fix the home. If you were to get a loan from a bank you would have to pay a large down payment, pay your closing costs and could not get funds for repairs.
Who Is approved for an FHA loan?
Everyone can apply for an FHA Loan! There are no location restrictions and no income restrictions. The FHA also has no credit score requirements. The lender making the loan will have their own credit requirements, we lend down to a 500 credit score. First time home buyers are encouraged to apply as they are candidates for 100% financing. Existing homeowners can also apply for an FHA Loan. People interested in buying a mobile home, building a home or repairing a home can also apply. The FHA mortgage cannot be used for second homes or investment properties.