FHA Housing Loans are low down payment loans guaranteed by FHA. FHA is an entity of the United States government that provides mortgage insurance for FHA Approved Lenders.
The main reason lenders would lend to home buyers that only have a small amount of money for a down payment is the FHA takes away much of the risk to the lender. If the FHA Housing Loan defaults then FHA will reimburse fully the amount of the loan to the lender. Because of the government insurance the lenders are willing to give more lenient terms to the home buyer.
FHA Housing Loans are geared towards people with less than perfect credit and higher debt-to-income ratios. You can get a good idea what your debt-to-income ratio is by taking all of monthly debt payments such as car payments and credit card payments and dividing the total amount by your monthly income. This is your debt-to-income-ratio.
If this number is close to 30 to 40 percent then there is a good chance you will qualify for a FHA Housing Loan.
Currently the FHA Housing Loan down payment requirement is only 3.5%. Most conventional loans require up to 20% down payment. Also, you can ask the seller to pay most of your closing costs. And like I said above, your credit does not have to be perfect.
FHA does not lend out the money for the mortgage, they only guaranteed the amount of the loan. It is not hard the found a lender that will do a FHA Housing Loan, there are many throughout the United States.
The FHA generally helps low-to-moderate income individuals get mortgages, but one should be clear that it is not actually the FHA that loans out the money. In order to get the benefits of a FHA loan, you must find a lender who is approved to make FHA loans.
Normally it does not take any longer to secure this type of loan than a conventional loan. Usually you can close with 30-45 days.
One disadvantage is the home buyer has to pay private mortgage insurance. You will have an up-front amount that can be rolled back into the mortgage and also a monthly amount that will be included in your monthly mortgage payment.
FHA Housing Loans have become the only low down payment option available in today’s housing market. They have become very popular and they may be the only way that you can get a mortgage for your dream home!