FHA Loan

The FHA loans or Federal Housing Administration loans have proved to be a great financial resource for homebuyers who want to finance their housing project or are looking for a refinance on their home loans. These loans are a breather for borrowers who are not capable of making huge down payment or are looking for low interest rates. People who do not have impressive credit score can also apply for the FHA loans. A major chunk of the people applying for these loans constitutes the ones who have already been denied conventional loans.

FHA became a part of the Department of Housing and Urban Development (HUD) in the year 1965 and technically it is not a lender. FHA is the biggest mortgage insurer and the lenders are insured by the FHA in case the homeowners default on the payment of their mortgage loans. It not only insures the single homes but also include the multifamily homes along with hospitals and manufactured homes. This is a non-profitable of the government and works purely from the proceeds of the insurance of the mortgage loans.

This program is best suited for the first time home buyers and the ones who might not otherwise qualify for the conventional home loans. The FHA insures the mortgage loan and shares the risk of the lenders. The heavy loss incurred by the lenders due to subprime lending has restored the faith and fan following of FHA loans. FHA loans can be had only once and it does not matter whether the borrower is purchasing his first or sixth home. The limits on the FHA loans differ from state to state and county to county.

The FHA loans are real life savers for the lenders as the FHA approved lenders will be able to recover their debts in case of a default in the payments from the borrower’s end. The guidelines for FHA loans are much lenient compared to the conventional loans. All the FHA loans are assumable in nature thus providing an additional layer of shielding for the borrower and his family.

The attractive interest rates are also a great incentive to the first time borrowers who would be highly benefited due to the lesser financial burden. Refinancing options are also available with the FHA loans and the best thing is that the loan does not need to be a FHA loan. This is known as the streamline refinance and in this the ARM is converted into a fixed monthly payment scheme.