FHA Home Loan Programs

Many home buyers and home owners commonly ask, What is a FHA loan? or What is an FHA mortgage?, so let me answer the question. Though FHA loans are one of the most popular home loan products,  very few people understand the role FHA plays in the loans it insures.

FHA is NOT a bank or lender as many believe. They DO NOT write checks for people who are buying homes. The FHA is actually a government entity that insures loans made by lenders/institutions/banks to people who are approved by FHA to borrow the money, based on FHA’s loan requirements and qualification criteria.

This is a very oversimplified explanation, but the bottom line is this: FHA lets lenders know that if the borrower defaults on their home loan that they (FHA) will insure any loss to the lender. That in turn allows lenders to feel more secure in lending money to borrowers who usually have a smaller down payment and may even have less than otherwise acceptable credit according based on the lender’s own underwriting standards.

Basically, FHA is almost co-signing the loan for you. That is not 100% accurate, but it may help paint the picture for you.

Many people also falsely believe that FHA loans are for first time home buyers only. FHA loans can be obtained by anyone purchasing an owner occupied residence (some other restrictions may apply). This means that you can buy every home you ever own with an FHA loan if the other loan requirements are met.

In addition, depending on many loan programs or first time buyer programs, the definition of a first time home buyer is someone who has not been on title to a property in the last 3 years. Every program is different and you would need to check with the programs you are interested in, but this is a very common definition of the term.

Lastly, some people believe FHA loans and FHA loan requirements ensure that only low income people can get these loans. That is also false. There is no cap on income for these loans. However, there is a maximum loan amount meaning that depending on where in the country the property is located there will be a maximum amount FHA is willing to let someone borrow to purchase a home there.

This means that most people are able to take advantage of this great loan product and ease the burden of buying that first home. No one earns too much to be approved for an FHA loan so if this sounds like the right option for you go for it!

Basic overview of an FHA loan requirements:

If you are thinking of buying a home and want to know more about FHA loan requirements and what FHA loans are all about then keep reading. I will give you some of the basic FHA loan requirements you’ll want to know as a buyer, and even as a seller, if FHA loans are a popular way buyers are financing in your area.
Some benefits of using FHA loans to buy a home:

If you’re wondering what the benefits FHA loans offer today’s home buyers than you’re not alone. Many home buyers hear of these loans and how great hey are, but are not really sure why.

Two reasons why these loans can be a good option for any home buyer are: Low down payment requirement and easier qualifying standards.

FHA Loans have low down payment requirements

FHA only requires 3.5% of the purchase price of the home as a down payment. Most lenders these days will want to see 20%-25% down even with good credit. That can keep a lot of people from realizing their home buying dreams. The reality is many people CAN afford the monthly payment of a home but coming up with tens of thousands of dollars out of pocket is a little trickier.

Easier Qualifying Standards

With FHA loans there are easier guidelines and more forgiving standards than some conventional lenders. FHA loan requirements in regards to a buyer’s credit are lower than conventional loans, and as of this writing, a buyer must have at least a 620 FICO score. That means that those with less than perfect credit can still borrow the money they need, and the rates are usually similar with those of conventional loans.