Is an FHA Mortgage the Right Home Loan for You?

The FHA (Federal Housing Authority) mortgage program was created in 1934 to make home ownership available to people who did not have large down payments. Back then, most lenders required 50 percent down payments from homebuyers! The FHA mortgage program is administered by the US Department of Housing and Urban Development (HUD). The FHA does not actually lend money; instead, it oversees an insurance program that reimburses lenders if borrowers default on their FHA loans. This reduces the lenders’ risk, which allows them to make loans with smaller down payment requirements. FHA mortgage lenders offer a variety of home loans designed to meet many needs, including:

  • Mortgages to purchase single-family homes, condominiums and 1- to 4-unit multifamily homes. These are referred to as 203(b) loans.
  • Mortgages for manufactured or mobile homes (with or without land).
  • Mortgages to rehabilitate or improve a home that you already own, or one that you plan to buy. These are called 203(k) mortgages.
  • Refinance mortgages, whether or not your current loan is with FHA.
  • Reverse mortgages, called Home Equity Conversion Mortgages or HECM.

FHA mortgages are especially good for borrowers who need to finance more than 80 percent of their home’s purchase price or appraised value. These loans come with advantages and drawbacks that you should be aware of before you decide that an FHA mortgage is right for you. You’ll find a variety of articles on this site to help answer questions like:

  • What credit score do you need for an FHA home loan?
  • How do you shop for an FHA mortgage?
  • What are the down payment requirements? Can you use a gift or borrow your down payment?
  • What does “assumable” mean and why it is so important?
  • What ate the advantages and disadvantages of an FHA loan?
  • How much does an FHA mortgage cost?
  • How do you qualify for an FHA mortgage?
  • How can you use an FHA loan to buy a home for a relative?
  • Can you use the FHA program if you’re not a US citizen?
  • How can you use the FHA loan to buy a manufactured (mobile) home?
  • How do you use the FHA loan to build or renovate a home?
  • Can you buy a multi-unit property with FHA? (Yes!)
  • How do you use the FHA program to buy a condo or co-op unit?

The FHA loan offers a world of advantages that other programs do not — advantages you might never have dreamed of. Low down payment requirements, assumability, flexible underwriting guidelines, co-signers / co-borrowers allowed, down payments can be gifted or borrowed — these are some of the special features you may be able to take advantage of.

 

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