What is F.H.A.?
I’m often asked by people what is an FHA loan? The FHA loans are not loans available to only low income or limited income people. All kinds of buyers qualify for FHA loans.
Federal Housing Authority, commonly know as FHA provides mortgage insurance on loans made by FHA-approved lenders throughout the United States. FHA insures mortgages on single family and multifamily homes. It is the largest insurer of mortgages in the world! FHA has insured loans on over 34 Million properties since it’s inception in 1934. FHA does not create and fund loans themselves. They federally insure them so that the lenders are more secure in lending money to potential home buyers, thus less restricted guidelines are the benefit.
Unlike conventional loans that adhere to the especially strict underwriting guidelines of today, FHA insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the morgaged insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases the insurance cost to the homeowner will drop off your monthly payment after FIVE YEARS or when the remaining balance on the loan is 78 percent of the value of the property whichever is longer.
