What is an FHA Home Loan?
An FHA home loan is a mortgage loan fully insured through the Federal Housing Administration (FHA) and issued by FHA-approved lenders, such as a mortgage company, bank, savings and loan association, etc. An FHA loan has several key advantages over a traditional loan:
- Lower down payment. Your down payment can be as low as 3.5% of the purchase price. Moreover, money received as gift qualifies toward down payment (traditionally, mortgage companies do not include this amount in your assets). This makes home ownership more obtainable for the first-time homebuyer.
- Lower interest rate. An FHA loan can have a lower interest rate, which significantly reduce your monthly payment for the life of the mortgage.
- Lower closing costs. An FHA-approved lender usually offers lower closing costs than a conventional mortgage company.
- Easier to qualify. Currently there are tougher credit guidelines in place for most mortgage companies. However, loans through the FHA program are more easily approved for those with less than perfect credit because the federal government insures the loans.
- Lower chance of foreclosure. In case of financial difficulties, the FHA is more willing to work with the borrower and provides programs to help avoid foreclosure.
FHA loan is not a new concept. The Federal Housing Administration has been insuring mortgages since 1934. Therefore, an FHA loan is a very good option if you qualify: click here to see if you are eligible for an FHA loan (free via LendingTree.com). Another site to check is the FHA Mortgage Center, where you can apply for an FHA loan or just learn more about your FHA options.
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About the Author
is the owner of Moolanomy Personal Finance
. He is a licensed Realtor
specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.
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