What Is an FHA Mortgage Loan?

An FHA mortgage  is a mortgage loan insured by the Federal Housing Administration more commonly called "FHA". The FHA does not provide the mortgage loan; rather, it insures the mortgage for the FHA lender. If the borrower defaults, the FHA mortgage lender can seek recourse from the FHA. This lowers the FHA mortgage lender's risk and makes them more likely to grant FHA mortgage than traditional mortgage loans..

FHA Mortgage overview

 
An FHA mortgage is a mortgage insured by the Federal Housing Administration. FHA mortgage loans  have several key components.

• Easier qualifying-  Those FHA mortgage applicants with less-than-perfect credit are more easily approved for an FHA mortgage through the Federal Housing Administration because the federal government insures the FHA mortgage lender against borrowers default.
• Lower down payment-  FHA mortgages only require only 3 % down payment This down payment can also be gifted to the FHA mortgage applicant, which makes FHA mortgage qualifying more obtainable for the first-time home buyer than other mortgage programs.
• Lower closing costs-  FHA loans allow the seller to pay for your closing cost. In addition FHA mortgage loans require the lender to  follow strict FHA mortgage and closing cost guidelines. This usually means lower closing costs for FHA mortgage than a conventional loan.
• Lower overall costs- An FHA mortgage has better interest rates, which cuts down on the overall cost of an FHA mortgage compared to other mortgage loans.
• Avoiding foreclosure-  The Federal Housing Administration provides FHA mortgage loans to help borrowers  avoid foreclosure in case of financial trouble.

FHA Mortgage Eligibility Requirements

• Typically, the only income limitation is to have enough income to afford the FHA mortgage in addition to other debt payments.
• FHA mortgage applicants must have a valid Social Security Number, be a legal resident of the United States and be of legal age to obtain an FHA mortgage.
• The FHA mortgage lender must verifies whether you can qualify for the FHA mortgage by checking your income, assets, debt load and credit history.
• You must be able to qualify for the FHA mortgage.
• With an FHA mortgage there is not a minimum credit score required to qualify, however your score is still examined to help determine the interest rate.

Good FHA Mortgage Candidates

Certain FHA mortgage applicant are better suited for an FHA mortgage than others.

• For a first-time home buyer the FHA mortgage is a good option. It can help you get a better rate than a conventional mortgage and you do not have to have as large of a down payment to buy a home.
• FHA mortgage applicants who only have a small down payment or those who were given the down payment as a gift or grant  often find an FHA mortgage to be a good choice. FHA mortgage loans only require a 3.5 percent down and the down payment can be a gift from a family member or other source.
• If you have less-than-perfect credit or past credit troubles, an FHA mortgage is your best option. Because the Federal Housing Administration insures the FHA mortgage, FHA approved lenders can provide an FHA mortgage to a mortgage applicants with poor credit without needing to charge premium interest rates.

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