Discover FHA Loans

What are FHA loans? What is the FHA? FHA is an abbreviation for the Federal Housing Authority, which is a national government organization. The goal of the FHA is to allow more Americans to realize the dream of home ownership, as owning a home is good for the individual, the family, and the society as a whole.

How does the FHA go about meeting this mission to get more Americans into their own homes? FHA loans. That is the common terminology used by realtors and most people, but the terminology can be a little misleading if you are not yet aware of what an FHA loan is. The FHA does not actually lend money to potential homeowners. What FHA loans really are is a type of mortgage protection called mortgage insurance.

The concept is really a simple one to understand, although some folks are confused about it. This is how a real estate transaction works. You, the buyer, find the home of your dreams. You, the buyer, need to borrow money to get the house. You seek out a lender and apply. The lender, whether it is a mortgage company, a bank, or some other lender, decides whether or not to loan you the money. Once a lender agrees to loan you the money, a lump sum of money is transferred to the owner of the house by the lender. Then, you agree to pay X amount of dollars every month until that lump sum (plus taxes, insurance, and interest) are repaid in full. Simple, right?

Yes, really the basic concept is not difficult, although there can certainly be glitches along the way. One of the biggest glitches has often been the lender's reluctance to loan the money. That is where FHA loans come into play. The FHA provides mortgage insurance, and that mortgage insurance protects the lender in case you can't pay back the loan. Lenders are more eager to lend money when the FHA is protecting them, and that is how the FHA helps people get loans and realize the American dream of home ownership.

If you are a first-time homebuyer with limited credit history or have some credit issues in your past, you can certainly still qualify for FHA loans, and it may be just the thing to get you into that ranch-style dream that is just perfect for you and your growing family. Not every lending institution works in cooperation with the FHA, however, so it is necessary to find a lender who does so of you are interested in FHA loans. It is simple to find an FHA Preferred Lender; you can get your realtor to help you or you can simply go online to the FHA site and fill out a request. They will send you a list via email or regular mail. Generally speaking, FHA loans require a smaller down payment, can be easier to qualify for, and have lower interest rates. If you are going to buy a home, it makes sense to look into FHA loans.