FHA Loan

FHA Loan

An FHA Loan is generally known as a mortgage loan that is insured by the Federal Housing Administration. Basically, the federal government will insure loans with FHA approved lenders in order to lessen the risk of  a home loss if a current or potential homeowner defaults on their FHA Loan mortgage payments. The FHA Loan Program began in the 1930’s in response to the wave of foreclosures and defaults that were happening at that time. The FHA Loan Program helps to provide mortgage lenders with the right amount of insurance that helps to stimulate the housing market by making mortgage loan payments more manageable and affordable for a current or potential homeowner. The FHA Loan Program is considered to be a very relevant loan program in today's housing market especially for potential first time home buyers. 


Just like any other types of loans, an FHA Loan can have some advantages and disadvantages. One main advantage of an FHA Loan is it is considered to be one of the easiest types of mortgage loans to qualify for because it allows a current or potential homeowner to have a lower down payment and a not so stellar credit profile. The FHA Loan program will require you to have a 3.5 percent down payment. One other advantage of an FHA Loan is that the FHA Loan can be assumable if the homeowner is wanting to sell their home, meaning the potential buyer of the home can assume the current loan that the current homeowner has on the home. The disadvantages to an FHA Loan are since an FHA Loan does not follow the strict guidelines of a conventional loan, a FHA Loan will require the potential homeowner to have two kinds of mortgage insurance premiums, where one is paid up front or figured into the mortgage loan and the other is a separate monthly payment. An FHA Loan will also require that the house meet certain criteria and be further assessed by an FHA approved appraiser. If the home that a potential home buyer wants to purchase does not meet certain standards and the seller won't agree to the repairs, then the potential home buyer's only option is to pay for the repairs themselves at the closing of the sale. Ultimately, an FHA Loan will carry maximum mortgage limits that will vary by state or county, so a potential home buyer will want contact a local real estate specialist to help research what the FHA Loan limits are in their area before they decide if an FHA Loan is right for them.