Frequently Asked Questions
For decades, the Federal Housing Administration has helped Americans realize their dreams through buying a home. From mortgage insurance to specialized programs, there could be an FHA loan program that will assist you in funding your home purchase. To get the most comprehensive FHA home loan tips, be sure to read through these commonly asked questions.
What is an FHA Home Loan?
FHA home loans are regulated by the Federal Housing Administration, which is part of HUD (the federal government's department of Housing and Urban Development). Through FHA loans, your mortgage is insured through the government. This means that consumers can qualify for loans with lower down payments, be subject to less stringent credit qualification regulations and, possibly, pay lower closing costs. FHA loans are particularly attractive for first-time homebuyers and other homeowners who need a little help getting approved for a mortgage, such as those individuals who are purchasing a fixer-upper. The government has offered these loans since 1934 and there are several different types of FHA programs offered.
What is FHA mortgage insurance?
Often, consumers who have less than 20 percent equity in their homes are required to pay mortgage insurance. This insurance protects lenders in the event that that a homeowner defaults on a mortgage. If you have an FHA loan, you may have mortgage insurance as part of your monthly payment. This money not only protects your lender, but it also helps fund loans throughout the country. The government collects this money from millions of homeowners and redistributes it in loans and other programs. In fact, the FHA's mortgage insurance money is the reason you were able to receive your FHA loan; the program is entirely funded by these monthly payments; FHA programs are not paid for by taxpayer money.
Do I have to get an FHA loan?
Consumers have the freedom to apply for any loan they choose. FHA loans offer consumers many benefits - particularly those consumers who are purchasing their first homes - so it could be in your best interest to seek out an FHA-approved lender. Many FHA programs offer easier approval processes for consumers with short credit histories, or assistance for homebuyers who cannot afford a complete down payment. You don't have to take out an FHA loan, but you should seriously consider the benefits and which type of loan is best for you.
How is an FHA mortgage different from another mortgage program?
Generally speaking, there is no difference! Every mortgage program will have its own particular intricacies - from the down payment required to the credit history necessary for an applicant. In fact, a loan program in your city may vary greatly from a similar program in another state. As a rule of thumb, mortgages all contain the same fundamental elements: You have a loan balance that you gradually pay off (usually over 30 years) through monthly payments. The interest rate at which you pay is determined by factors such as your credit history and market conditions. No matter which type of mortgage you select, be sure to read through your obligations, the interest rate, payment schedule and terms and conditions.