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What is a FHA Loan?

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  • Written By: Ken Black
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 November 2016
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An FHA loan is a mortgage loan that is insured by the U.S. Federal Housing Administration to help those who are buying homes for the first time or are in other special circumstances. An FHA loan offers a number of benefits over existing loans and are especially attractive to first-time home buyers or buyers with lower incomes. The program is administered by the federal government and has been in existence since 1932.

The FHA loan program is designed for a number of different situations. Its primary purpose is to help individuals purchase first homes, but that is not the only reason. FHA loans can also be used by those who wish to repair homes. The cost of acquisition and the cost of the repairs can all be put into one FHA loan, making the entire financing very convenient. Seniors can also benefit from an FHA loan, as there are special programs for them as well.

The FHA loan program can be a good choice for many, despite what the economy may be doing. In some cases, even when there is a significant amount of foreclosures, and FHA loan is still a possibility. In fact, the FHA loan program began during the Great Depression precisely because it was so hard to obtain a loan for a home during that period of history.

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FHA loans are attractive to buyers for many different reasons. First, a previous foreclosure does not automatically disqualify someone from the program. Other things are taken into consideration. Second, the credit requirements for an FHA loan are often less stringent than they would be with a conventional loan. Also, lower interest rates may be offered with an FHA loan.

An FHA loan does require a down payment, but often this is a very small sum of the total being borrowed -- perhaps 3 percent. The FHA notes that this helps in other ways. While many may have a hard time coming up with enough money to make the required down payment, once it is made, the monthly payments on the loan are less than they would be otherwise. Also, they down payment starts to build immediate equity in the property.

Those who choose an FHA loan should understand they are not dealing with the U.S. Federal government directly or paying the government. Rather, they are working through a traditional lender, much like they would for any other type of loan. The federal government's job is merely to insure the loan, thus lessening the lender's risk in the case of a loan default.

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andee
Post 4

How do I go about finding out what the FHA loan guidelines are for seniors? My mom is thinking about selling the home she has lived in for many years and is looking for something smaller.

One thing that has held her back is she lives on a very limited income and thought she wouldn't be able to qualify for a home loan.

She needs a smaller home and would love to find something with a smaller payment as well. She is healthy enough where she can still be in her own home and is not ready to give up her independence.

I don't think she even realized she might qualify for something like an FHA loan. She wants to also find something that is good quality. I think many people think of lower income housing as homes that are in bad shape and need a lot of work.

Mykol
Post 3

I didn't realize that you could still qualify for an FHA loan even if you had already been foreclosed on with a different house. For some reason I thought you could only use this program if this was your very first home. Maybe I have this confused with a different program.

I never thought I would be in the position I am today. When I lost my job I never realized how long it would take me to find a job that would pay my bills. My home was foreclosed and I have been renting for a couple years now.

Since I don't make nearly as much money as I did before, I might be able to qualify for this loan program now. It's nice to know there are programs available for people who are struggling but would still like to own their own home.

julies
Post 2

My daughter and her husband have also had a good experience with this program. They are a young couple and were looking for a home they could fix up. They both had good, steady jobs, but they didn't have much money for a down payment.

They met all of the FHA loan requirements, so this is how they were able to purchase their home. They borrowed enough money to also cover many of the expenses to fix up the home.

By doing it this way, they could get the home liveable in a much shorter amount of time. I know this program is not for everybody, and many people don't meet the guidelines, but it was a great way for them to get their first home.

John57
Post 1

I think the FHA home loan program for first time home buyers is a great idea. I used this program when I bought my first home.

I was single and didn't have a large income, but had a steady job and was tired of the apartment life. I was so excited to finally own my own home.

The FHA program allowed me to get a great interest rate. If I hadn't taken advantage of this program, I probably would have gone many more years before buying my first home.

I have bought and sold more than one home since then, but an FHA loan was my start in home ownership.

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