The Federal Housing Administration (FHA) runs several programs to promote home ownership.  FHA loans are mortgages obtained with the help of the FHA. An FHA loan is a loan insured against default by the Federal Government better known as FHA. In other words,  FHA guarantees that a lender won’t have to write off a loan if the borrower defaults –FHA will pay. Because of this guarantee, lenders are willing to make larger mortgage loans with less stringent credit requirements.   Almost anybody can get an FHA loan. There are no income limits – like you may find with other first time buyer or government sponsored programs. However, there are limits on how much you can borrow. In general, you’re limited to relatively small mortgage loans relative to home prices in your area. To find the limits in your region, visit HUD’s Website.

Who Can Get an FHA Loan

  To qualify for an FHA loan, you’ll need to have reasonable debt to income ratios. In general, you have to be better than 29/41. In addition, you have to have decent credit. You don’t need wonderful credit to get an FHA loan; it just needs to be decent.

Why are FHA Loans so Great? 
  FHA loans are not for everybody. Nevertheless, they are a great help to some borrowers. FHA loans allow people to buy a home with a down payment as small as 3.5%. Other loans might not allow such a low down payment.

FHA loans offer a few other bells and whistles:

·         Easier to use gifts for down payment and closing costs

·         No prepayment penalty (a big plus for subprime borrowers)

·         An FHA loan may be assumable

·         Possible leniency during financial hard times

How do FHA Loans Work? 
  The FHA promises to pay lenders if a borrower defaults on an FHA loan. To fund this obligation, the FHA charges borrowers a fee. Home buyers who use FHA loans pay an upfront mortgage insurance premium (MIP) of 1.75%. They also pay a small ongoing fee with each monthly payment.

If a borrower defaults on an FHA loan, the FHA uses collected insurance premiums to pay off the mortgage.

Why Not Use an FHA Loan? 
  You may find that FHA loans are not for you. An FHA loan may not offer enough money if you need a large mortgage. In addition, the upfront mortgage insurance premium (and ongoing premiums) can cost more than private mortgage insurance.

In many cases, you can still buy a house with a very little down using a standard loan (not an FHA loan). In particular, home buyers with good credit can find competitive offers that beat FHA loans. Make sure you work with an expert when obtaining an FHA Mortgage

FHA Terms and Definitions:

 FHA Single Family Mortgage Insurance Program
Programs that help low and moderate income families become homeowners by lowering some of the costs of their mortgage loans.

FHA Mortgage Insurance Costs
An FHA loan the borrower will be charged a mortgage insurance premium equal to 1.50% of the purchase price of the property and a renewal premium of .500% in subsequent years.

Refunds Ready on FHA Loans
If you have ever paid off a home loan backed by FHA, you may have money owed to you.

Down Payment Gifts for FHA Loans
FHA allows 100% of the down payment to be a gift from friends, family or other sources.

FHA Mortgage Closing Costs
Closing costs can also be financed to reduce the up front cost of buying a home.

Streamline Refinancing for FHA Mortgages
A program that reduces the amount of documentation and underwriting that needs to be performed by the mortgage company.

FHA Single Family Rehab Mortgage - Section 203(k)
A single family home rehabilitation program that enables you to finance both the purchase or refinance of a house and/or the cost of its rehabilitation through a single mortgage.

FHA Single Family Mortgage Insurance for Outlying Areas - Section 203(i)
A single family mortgage program that provides mortgage insurance for a person to purchase a principal residence in a rural area.

FHA Single Family Adjustable Rate Mortgage
A single family adjustable rate mortgage that provide mortgage insurance for a person to purchase or refinance a principal residence at a lower initial interest rate.

FHA Property Improvement Loan Insurance - Title I
A program that makes it easier for consumers to obtain affordable home improvement loans by insuring loans made by private lenders to improve properties that meet certain requirements.

FHA Energy Efficient Mortgage
A program that provides mortgage insurance for the purchase or refinance of a principal residence that incorporates the cost of energy efficient improvements into the loan.

HUD Reverse Mortgage
A program for homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining. The program allows homeowners to borrow against the equity in their homes in a lump sum, on a monthly basis for a fixed term or for as long as they live in the home, or on an occasional basis as a line of credit.

FHA Escrow Refunds
If you have ever paid off a home loan backed by FHA, you may have money owed to you.