The Federal Housing Administration, or FHA, is responsible for numerous
programs to promote homeownership. The FHA does not actually loan money, but
rather insures mortgage loans against default. Mortgages that are insured by
FHA are called FHA loans.
With the recent mortgage crisis and the downturn in the economy, FHA loans have
become a hot topic in the housing industry. Unfortunately, due to common
misconceptions surrounding FHA loans, many borrowers are unaware of the
benefits these loans can offer.
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FHA loans are not just for first-time home buyers. As long as a borrower is
purchasing the home to be used as a primary residence, he or she can use an FHA
loan, regardless if the home is their first, third or tenth. FHA loans can also
be used for refinancing a current home loan on a primary residence.
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There are no income-level limits with FHA loans, so anyone may qualify. There
are loan amount limits, however, which are based on the median home value in a
borrower’s geographic area.
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FHA has a lower down payment requirement than other loan programs – as little
as 3.5%. FHA also makes it easy to use gifts as part of the down payment.
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There are no pre-payment penalties on FHA loans.
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Loan rates on FHA loans are competitive with other types of mortgages.
FHA loans offer many advantages to borrowers looking to purchase a home or
refinance their current mortgage. Utilizing a lender who is experienced in FHA
loan origination will help ensure the loan process goes smoothly and as quickly
as possible.
