What Is a FHA Loan

What is a FHA loan? Homebuyers looking for the best opportunity to get into an affordable mortgage may find an FHA loan helpful. FHA loans are loans insured by the Federal Housing Administration (FHA), a department of the United States Department of Housing and Urban Development (HUD).

FHA can help borrowers obtain a mortgage.

FHA loans have been used since 1934 as a way to help new homeowners obtain affordable home loans. It is important to note that the FHA does not provide home loans. Rather, they offer insurance to the lender for the mortgage loan offered to the buyer by the lender. This provides more security and less risk for the lender. In turn, there are several advantages to the home buyer as well.

• FHA loans have low down payment requirements.
• These loans may have lower closing costs.
• FHA loans are easier to qualify for in terms of credit score requirements.
• Some lenders offer reduced interest rates to those who qualify for FHA loans.

Those who are interested in these mortgages simply need to contact their lender and request more information about the loan program.

Many people can benefit from one of the various programs offered by the FHA. Anyone who is considering obtaining a mortgage should first determine if they quality for FHA loans.

• First Time Home Buyers: Those purchasing their first home will find that FHA loans can help them to qualify for the loan. Down payments may be reduced to as low as 3.5 percent of the purchase price of the home. The FHA considers anyone who has not owned a home in the last three years to be first time home buyers. This type of loan can be used on homes with one to four units. The first time home buyer loan program is called 203(b) mortgage insurance.

• Senior Citizen Loans: FHA loans are available for seniors, too. The FHA Reverse Mortgage is a type of loan for those 62 and older who own their home. Individuals have to live in their home and own it outright or have a low balance on an existing home loan. If so, this mortgage will pay you on a monthly, quarterly or yearly basis a set amount of money for the rest of your life or until you sell the home. A reverse mortgage does have other implications, such as at the time of death or permanently moving out of the home, the lender takes possession of the property.

• Fixer Upper Loans: FHA loans are available for properties that are purchased with the intent of fixing them up. This type of loan allows the buyer to purchase a property and to finance any repairs needed all in one loan. The value of the fixer upper after the repairs are done must be the same or higher than the amount of the loan. Contact FHA for more information regarding the 203(k) mortgage program for fixer upper loans.

• Manufactured Housing Loans: Individuals who wish to purchase mobile homes, manufactured housing or factory built homes may obtain a manufactured housing loan through the FHA. This type of loan is available in two forms. One is designed for those who will purchase the land the home will sit on. The second is designed for those who will rent the land, such as in a mobile home park. The Office of Manufactured Housing Programs provides more information on this FHA loan.

• Energy Efficiency Loans: Another option for a home buyer is to secure a home loan that allows you to fix up the home through energy upgrades. Energy improvements to the home are usually significant improvements such as using solar or wind energy. Energy Efficiency Mortgages are available for current homeowners and new home buyers.

If you are still asking, "What is an FHA loan?" or you would like more information on obtaining one, contact an FHA lender. The FHA approves lenders to offer FHA insured loans. HUD lists approved lenders at their website.

For those who wish to obtain advice on which type of loan is the best one for them, contact a HUD approved housing counselor online or at (800) 569-4287.

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