FHA Mortgages

The New Deal programs initiated under Franklin D. Roosevelt included several methods to help the American economy recover from such a drastically low level. The programs included many new incentives to raise the level of government spending, and in turn, encourage the people in America to once again become financially stable. The initiation of the Federal Housing Administration (FHA) loans began during this era, to encourage and help people have the ability to own their own homes and rebuild their lives.

Purpose of an FHA Loan

Especially during and directly after the Great Depression occurred, most Americans were unable to even dream of owning their own homes. Not only had they just lost everything, but they had no money in their savings accounts to put a down payment on a homes.

The newly available FHA mortgage program was developed by the government so that individuals could borrow money to purchase a home. In the past, and still currently today, most of the people who qualify for an FHA loan are those who could not otherwise afford the down payment on a home. The original goal of the program was to have these down payment loans subsidized by the United States federal government, but eventually have the program run itself, without government assistance. Currently, the program is insured by the FHA, which is also known as the “Federal Housing Administration.”

Who Qualifies for FHA Mortgages Today?

Since the beginning, the FHA loan program has provided help to more than 30 million people who would not have been able to afford a down payment on a home without assistance. Today, the Administration continues to help people who fall into the “low” or “middle” income level categories.

Benefits

There are several benefits to qualifying for an FHA Mortgage. One of the largest benefits is the pure fact that without an FHA loan, many people would never qualify for a mortgage, and would therefore never be able to own a home. Some of the other benefits of an FHA mortgage loan are that the interest rates on this type of loan tend to be lower, people using an FHA loan to purchase a home only need to make a down payment of about 3 percent of the value of the home (as opposed to 10 or 20 percent for “regular” loans), and the FHA can also help homebuyers finance all of the other costs associated with buying a new home – such as closing costs and mortgage insurance.

How to Qualify

An FHA loan is designed to help those who would otherwise not be able to afford a down payment on a home, and also for those who do not qualify for other types of mortgages. However, this in no way means that anybody and everybody who applies for an FHA mortgage loan will be approved. Some of the most basic requirement for qualifying for this type of loan are: a good credit score, enough money to pay for at least a 3 percent down payment on the home of choice, and a pre-determined income to housing costs ratio (although this may vary depending on the area of the country where the home is located).

In Conclusion

In addition to the above qualifications, the FHA will not provide a loan that is more than about $150,000. Therefore, homes that are valued significantly more than this amount of money will probably not qualify for FHA assistance. The inspection standards for a home under FHA mortgage consideration are also tougher than those for a conventional loan, so if you are looking at buying a home that will need a lot of work, this type of mortgage may not be for you.

Consult with realtor or mortgage lender about applying for an FHA mortgage.