FHA Loan

FHA Loan

The FHA loan program is one of the most popular mortgage programs in the United States. Instead of lending money, the Federal Housing Administration (FHA) insures loans made through FHA-approved lenders, which reduces their risk if the borrower defaults. This allows lenders to provide loans to borrowers who would otherwise not qualify, including those with average credit or low to middle income.

The FHA mortgage program was put in place in the 1930s following a great deal of defaults and foreclosures to offer mortgage lenders insurance against their risk and make home loans more affordable and accessible. FHA loans are mostly popular with first-time buyers.

There are many reasons to consider an FHA mortgage:

  • Down payment as low as 3.5 percent
  • Down payment and closing cost money can be gifted from a family member
  • FHA loans are easier to get after bankruptcy or foreclosure than a conventional loan
  • Easier to qualify with underwriting that focuses on job security, employment and income
  • No prepayment penalty
  • Closing costs can be rolled into your loan
  • FHA loans are assumable, which may be a positive selling point in the future
  • FHA loans are good for good credit/income borrowers who don’t have liquid funds for down payment

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