| The Federal Housing Administration (FHA) insures | | | | mortgage, making the purchase price of a home more |
| mortgages so that low-income individuals can still | | | | affordable. |
| qualify for home loans. Insurance from the FHA | | | | The FHA also puts a ceiling on the fees that are |
| mitigates lender risk and lowers interest rates and initial | | | | tacked on to home mortgage loans. For instance, the |
| cost for home buyers. However, there are drawbacks | | | | loan origination fee must be less than 1% of the total |
| to this program and it isn't for everyone. | | | | loan amount. |
| What Section 203(b) Says About Mortgage Insurance | | | | Disadvantages of FHA Loans |
| The FHA is not a mortgage lender, but a mortgage | | | | Of course, FHA loans include drawbacks and aren't |
| insurer. This program helps families buy homes by | | | | for everybody. The FHA sets loan limits in order to |
| reducing costs. The program motivates lenders to | | | | continue to serve low- to moderate-income families. |
| grant mortgage loans to people who just barely fall | | | | When you consider these loan cap amounts, you |
| short of the underwriting requirements. FHA loans are | | | | might end up having to apply for a conventional or |
| known for their small down payments as compared to | | | | jumbo loan to buy the house. |
| traditional loans. | | | | The home you buy must also become your primary |
| Under Section 203(b), the FHA helps people to | | | | address. FHAs are not intended for use by people |
| purchase a new or previously-owned home with up to | | | | buying second homes or investment properties. |
| four units inside. The only catch is that the buyer has | | | | Getting an FHA Insured Mortgage |
| to personally occupy the home. | | | | A large variety of participating lenders - almost all of |
| Advantages of Using the FHA Program | | | | them - carry loans backed by the FHA. As always |
| FHA mortgages make it possible for some home | | | | when shopping for a loan, look around, do research, |
| buyers to qualify for a traditional loan with lower | | | | and compare mortgages. Just because a lender has |
| interest rates, rather than toxic sub-prime mortgages | | | | FHA approval doesn't mean they have the lowest |
| with high rates. Over the course of the loan, this saves | | | | rates. |
| thousands of dollars in interest. | | | | Rates and terms are easy to locate online, either by |
| The requisite down payment is also smaller. Typically | | | | surfing lender websites or visiting a mortgage broker's |
| lenders ask for 10% down, but the FHA makes it | | | | home site. Collecting quotes allows you to gather and |
| possible to get in a home with as little as a 3% down | | | | research interest rates without harming your credit |
| payment. Closing costs can also be absorbed into the | | | | rating. |