FHA Loans: The Ins and Outs

Owning a house is a financial burden to most individuals, but FHA loans can bring great relief to many families. This home loan program offered by the government has helped provide funds to first-time homeowners and at the same time assist them in their mortgage financing.

Advantages of FHA Loans Over Conventional Loans

FHA loans have more advantages than loans offered by government sponsored entities like Freddie Mac and Fannie Mae. Because FHA loans are government-insured lending programs, homebuyers are likely to get easier and fast approval. Some advantages of this government-sponsored programs are:

  • down payment is as low as 3% compared with 5 to 20% required by a traditional loan
  • credit qualifying criteria is easy
  • FHA established a foreclosure protection program that aids owners having problems in
  • paying their mortgages
  • low closing cost administered by the Housing and Urban Development (HUD)
  • availability of extra cash to make the home energy-efficient

Requirements to Become Eligible for a Loan

A set of qualifications has to be met before you become eligible to apply for FHA loans. Whether you want to buy a house or refinance an existing mortgage, the following requirements should be observed:

  • you must pass FHA's standard credit qualifications
  • you have to finance the payment of the mortgage insurance premium and the annual premium as well
  • the home you plan to purchase should undergo and pass the FHA inspection
  • only properties with four units are considered and approved
  • the maximum value of your home should meet the limits regulated by HUD per county