What is an FHA Loan?



Recently there has been somewhat of an uptick in housing prices and sales as a lot of cash investors are coming back into the market with a vengeance. If you are a homeowner or investor be sure to review the  fundamentals of Estate Planning and how important it is to use the right product for your portfolio and not the type of mortgage your loan officer demands that you use.

I also found it interesting that featured on HGTV, was a couple in their early 20's purchasing their first home through an FHA loan. Purchasing a home is exciting but as the market continues to change, finding the right home takes a great deal of work. However, finding the right mortgage is even more important. If you have been looking for a home and have gone through the pre-qualification process with a loan officer then you may have heard about the FHA loan as one of many options when looking for a program that fits your needs. Here are some facts about FHA loans.

A FHA loan is a popular option for first-time home buyers because the down payment requirement options can be as low as 3.5% and this down payment may be in the form of a gift. The FHA is not a lender but insures that the total mortgage will be paid to the lender if the buyer defaults. It is always up to the private lender to decide whether or not they will lend the money. The FHA mortgage guidelines tend to be a little more forgiving than the conventional mortgage guidelines in terms of borrowers credit history, (i.e. bankruptcy discharge).

FHA stands for the Federal Housing Administration and was established by the government to improve housing conditions for Americans back in 1934. Prior to 1934, a down payment was typically 50% of the home's price and payments were stretched out between 1-5 years. You can learn more about FHA loans from the Department of Housing and Urban Development.