AEM Mortgage Minute with Deanna Daughhetee

One of the questions I hear often is, What exactly is an FHA loan? An FHA loan is a mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by federally-qualified lenders. American Equity Mortgage has been an FHA-approved lender for over 12 years.

FHA loans have historically allowed lower-income Americans to borrow money for the purchase of a home they would not otherwise be able to afford. The program originated during the Depression in the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by the government, but the goal was to make them self-supporting, based on insurance premiums paid by borrowers.

Over time, private mortgage insurance companies (I’ll save PMI for another posting) came into play, and now FHA primarily serves people who cannot afford a conventional down payment of 20% or more by offering little or no money down on a home purchase.