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What is a FHA Loan?

What is a fha loan? Discover the best reasons for using the fha home loans and what the fha mortgage has to offer those looking for a mortgage.

This question is asked by many people. So, what is a FHA loan?

3d man sitting in a question mark considering what is a fha loan

First and foremost you need to know that FHA or the Federal Housing Authority has been helping people buy homes since 1934. They are actually part of HUD or the US Department of Housing and Urban Development which is a government run organization. They do not lend the money but insure your mortgage to the lender.

To put it in terms you might understand today, it's kind of like a government bailout program. In other words, the government says to your lender, if the borrower does not pay the loan and defaults, we guarantee the lender to get their money.

With this type of a loan program, the lender can offer you 3 main benefits for using the FHA home loans.

Low Down Payments
Low Closing Costs
Easy Credit Qualifying

So once again, what is a FHA loan? It is a loan you can obtain from many different lenders that you can use to buy your first home. It can also be used for those who have had a home in the past. You just cannot have more than one FHA loan at a time. The FHA loan may be a good option for you.

What Does the FHA Loan Offer Us?

It allows us to put a low down payment of just 3.5% of the purchase price. Many of the mortgage closing cost and other fees can be included in the loan. Furthermore, you can buy anything from a single unit up to four units. So if you qualified, you could buy a four unit apartment and have the other 3 tenants make your payment for you!

What if you want to buy a home that needs fixing up? Again, FHA offers a way you can buy the home and finance the repairs. In fact, even if you already own a home and want to remodel it, you can refinance the home with a FHA loan and add the cost of the repairs into the loan.

One last thought in answer to the question what is a FHA loan. FHA also will finance manufactured housing and mobile homes. There are two loan programs where you can buy a home that sits on land or even if it's in a mobile home park.

In summary, the FHA loan is indeed a great program for people who are first time home buyers, those who may not have much money for the down payment or even have perfect credit. You may want to seek out an FHA lender in your area.

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