| eral Housing Administration (FHA) insures mortgages | | | | home. |
| to allow low to moderate income families to purchase | | | | The FHA also limits fees that can be charged to the |
| their own home. With government backing, families can | | | | borrower. For example, the loan origination fee cannot |
| buy a home at a lower initial cost. However, there are | | | | surpass 1% of the mortgage amount. |
| limitations with this program. | | | | Drawbacks |
| Mortgage Insurance — Section 203(b) | | | | FHA loans do have their drawbacks and are not for |
| The FHA provides mortgage insurance, not mortgage | | | | everyone. For instance, the FHA sets loan limits to |
| loans to families. However, this program can reduce | | | | ensure the program serves low to moderate income |
| the cost of a home loan by thousands of dollars. The | | | | families. You may find with these loan caps that you |
| program also encourages lenders to finance | | | | will need to apply for a conventional or jumbo loan to |
| mortgages for people who might just miss the | | | | purchase your home. |
| underwriting requirements. For example, FHA loans | | | | You also have to use the house as your primary |
| require a smaller down payment. | | | | residence. If you are looking to invest in property or |
| With FHA’s Section 203(b) program, a | | | | buy a vacation home, then you will need to look at |
| homebuyer can purchase a new or used one to four | | | | other financing sources. |
| family home. However, the buyer has to live in the | | | | Applying For FHA Mortgage |
| home. | | | | FHA insured mortgages are provided through |
| FHA Benefits | | | | approved financial institution. Fortunately, many of |
| A FHA mortgage allows some borrowers to qualify | | | | today’s lenders are approved. Just like with any |
| for the lower interest rates of a conventional loan, | | | | type of loan, you should compare rates of different |
| rather than using a higher rate sub-prime mortgage. | | | | lending companies. An FHA approved institution |
| This can save thousands in interest charges. | | | | doesn’t necessarily mean they offer the lowest |
| Required down payments are also smaller. Instead of | | | | rates. |
| the typical 10% down, a buyer can put down as little as | | | | You can easily find rates and terms online by |
| 3%. The closing costs can also be financed with the | | | | searching individual sites or using a mortgage broker |
| mortgage, lowering the initial costs of purchasing a | | | | site. |