FHA Home Mortgage Loans

An FHA Home Mortgage Loan is a mortgage loan insured by the Federal Housing Administration (FHA). The FHA is part of the United States Department of Housing and Urban Development (HUD). The loan actually comes from lending institutions that team up with the FHA to provide an FHA Home Mortgage loan-the lender provides the money and the FHA insures the loan on behalf of the borrower. Since the FHA itself is insuring the loan, borrowers can potentially get better terms than they would with a mortgage from a private lender.

Types of FHA Loans

The FHA offers several different loan programs for different circumstances:

  • Basic home mortgage loans. These are straightforward mortgage loans for buyers wishing to purchase a home. Borrowers may obtain a mortgage for a condo, single or multiple-family residence.
  • "Fixer-upper" loans. Purchasers interested in a home that needs extensive repair may have difficulty obtaining a mortgage loan before repairs have been completed. However, the FHA has a loan program allowing potential buyers to submit a job proposal for the repairs along with their loan application instead.
  • "Energy Efficient" Mortgages. If a potential buyer plans to make special energy-efficiency improvements to their new home, this program can finance the planned cost of those improvements as well as the purchase price of the home.
  • "Good Neighbor Next Door" loans. The FHA offers an additional 50% discount on a home's purchase price to teachers, law enforcement, EMTs or fire safety professionals who purchase a home in certain communities.
  • HUD Homes. In addition to just offering a mortgage, the FHA also sells some homes itself.

Why You May - Or May Not - Want An FHA Home Mortgage Loan

FHA Home Mortgage Loans were designed to assist first-time homeowners, or homeowners with lower incomes. Typically, FHA home mortgage loans require only a 3% down payment; have more flexible income requirements and more forgiving credit standards. Most lenders would turn away an applicant who has declared bankruptcy, but the FHA will accept their applications, as long as two years have elapsed since they declared bankruptcy.

However, the FHA home mortgage program has requirements that may not be suited to every buyer. An applicant purchasing a home with an FHA Home Mortgage must use that home as his or her primary residence, so an applicant who purchasing a home as an investment would not qualify. The FHA also has stricter standards during the home appraisal and may reject an application based on the state of the property itself. Participants in the "Good Neighbor Next Door" program are restricted to buying homes within officially recognized "revitalization" communities, and must agree to live in their new home for at least 36 months. Finally, a potential buyer who is able to afford a greater down payment may be able to obtain a better deal through a more traditional lender instead.

How To Apply For An FHA Home Mortgage Loan

Rather than applying through the FHA directly, applicants must contact an FHA-approved lender in their community. To find an FHA lender in your community, visit http://www.fanniemae.com. For more information about specific FHA home mortgage offers, visit http://www.hud.gov.