What is a FHA Mortgage and Do I Need One to Buy a House?

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The FHA loan program has become a household name with realtors and first time home buyers for several decades. This is a trusted government-backed home financing program that should be considered when buying or refinancing in 2018.

History of the FHA Mortgage Programs

This is home loan is insured by the Federal Housing Administration. The FHA was founded by the FDR administration in the middle of the Great Depression. Since 1934, the FHA has been insuring mortgage products for home buyers in the United states.

The FHA mortgage product is considered a flexible home loan because the down-payment and credit rules are easier than most of the other popular home financing programs. The FHA-insured loans are easier to get approved because the federal government has made accessibility a priority for this home-financing initiative. The United States government has manged the FHA program with Congressional over-sight and the Department of Housing and Urban Development.

Down-Payment and Credit Rules

FHA underwriters only ask for 3.5% down payment if the borrower has a low debt to income ratio and at least a 580-credit score. If you have a lower credit score the underwriter will typically request a 5 to 10% down-payment.

Are Interest Rates on FHA Mortgages Available at Market-Levels?

The interest rates on FHA-insured mortgages remain competitive when compared to Fannie Mae or Freddie Mac. Traditionally, FHA interest rates are priced competitively. It is very important to determine how much of a home loan you can afford before making offers on residential real estate.

Are There Any Down-Sides to the FHA-Insured Mortgage?

If rates are great and you do not need good credit scores, then what is the catch? However, with FHA borrowers will typically pay a high premium for monthly mortgage insurance.This is a negative feature of the FHA loan program and has to be considered when comparing other home loan options.

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