FHA Loans Guide

When a mortgage is insured by the Federal Housing Administration (FHA), it can be called an FHA loan.  The Federal Housing Administration began insuring loans because of the high rates of foreclosures and defaults that happened in the 1930s.

FHA loans are incredibly popular amongst homebuyers, especially those that are looking to purchase their first home. There are a few other notable differences between FHA and conventional loans that mortgagors should consider when choosing a method of financing a new home.

Download our helpful and comprehensive guide to learn about FHA loan requirements, how to apply, locating FHA approved lenders and much more.

FHA Loans 101

If you are in the market for a new home, you are probably wondering what makes an FHA loan such a good financing option. Through the Federal Housing Administration (FHA), you can be eligible for a loan with a lower credit score than most other options. The FHA loan requirement is far less stringent, and you may be approved for a loan with credit scores as low as 500.

Lenders can offer these optimal FHA mortgage rates because their money is insured and there is less risk of a financial loss. The wider eligibility criteria and reasonable interest rates makes this financing opportunity available to more home buyers than any other type of loan.

Another significant benefit of FHA loans comes from the lower down payment requirements compared to conventional loans. Most conventional mortgage loans require a minimum down payment of about 20 percent of the purchase price for a home. This hefty requirement makes it difficult for low- to middle-income homebuyers to secure a conventional loan.

FHA approved lenders can offer borrowers loans with down payments at much more affordable percentages. In order to avoid giving homebuyers loans that they will not be able to afford, the Department of Housing and Urban Development (HUD) has established FHA loan limits that vary depending on the area where the home is being purchased.

Types of FHA Loans

Borrowers looking to secure an affordable financing option to purchase a home can benefit from one of the many types of FHA loans that are available. Regardless of the type, FHA backed loans will often provide mortgages at expanded credit and income requirements compared to conventional loans. However, homebuyers will find that the various types of loans that are insured by the FHA each serve a specific need. Borrowers are encouraged to discuss their options with their mortgage lender and select the loan type that best suits their unique situation.

Lenders can offer a variety of FHA loan options such as the Basic Mortgage Insurance, Home Equity Conversion Mortgage or the Rehabilitation Loan Mortgage Insurance (203k loan) to name a few. There are mortgage options for disaster victims, homeowners who want to purchase a home to rehabilitate and even loans for manufactured homes.

Not all types of FHA loans are necessarily intended for purchasing a new home. For example, the Energy Efficient Mortgage Program allows homeowners to borrow the funds they need to make their home more energy efficient. The wide variety of available FHA loans ensures that eligible borrowers can find a specific option that best suits their home buying needs.

To learn more about interest rates, the limits on FHA loans and further specifics about the program, download our detailed online guide.

Federal Homeownership Assistance Programs

The Department of Housing and Urban Development (HUD) also offer homebuyers numerous programs to help them finance the purchase of HUD homes. Initiatives like the Good Neighbor Next Door Program offer eligible families the opportunity to purchase a new home (in revitalization areas) for a massively discounted price. Additionally, the federal government hosts other unique home financing initiatives like the USDA direct loan program, which is designed to target rural economic development and homeownership in the country. These may be viable options for borrowers who were unable to secure an FHA loan that works for them.

For homeowners who need assistance with their current home’s loans, the FHA also offers HAMP and HARP mortgage refinancing options. The HAMP program aims to reduce the monthly mortgage payments for delinquent and at-risk borrowers. This helps them to afford their monthly payments, catch up with their past due balances and avoid foreclosure on their homes. HARP, on the other hand, focuses on assisting homeowners who owe as much or more than their home is worth.

With this program, homeowners can reduce their monthly payments and obtain fixed interest rates for the life of the loan. By refinancing with a HARP mortgage, homeowners can find more affordability and stability in their mortgage payments. Discover more about these federal homeownership assistance programs and how they are working to help Americans avoid foreclosure.

Additional Resources

If you are in the market to purchase a home or are already a homeowner, there are a variety mortgage options available from FHA loans and HUD homeownership programs. You may find it difficult to navigate these confusing technical terms and federal documents. In order to assist you, we have compiled additional resources that can be helpful during these processes.

Learn about the many benefits and requirements of HUD counseling and how it can assist you during the process of purchasing a home, being a homeowner and beyond. You will also find helpful information on how to perform an FHA streamline refinance, which would allow you to refinance your existing FHA loan with a streamlined and quicker process.

In addition to the resources provided through the HUD and FHA, our guide also includes information that is beneficial for every homeowner or home buyer. For example, you will gain access to resources such as invaluable tips for avoiding foreclosure. Regardless of the type of HUD, conventional or FHA loan you may have, avoiding foreclosure is a vital part of being a homeowner, so this information is always applicable. Finally, you can learn about the Fair Housing laws in the United States and how they can protect you as a homebuyer/homeowner.

To gain access to this collection of valuable information that can assist you on your journey to homeownership, download our comprehensive guide on FHA loans.