News and Events
March 25, 2008
What are FHA loans?
What are FHA loans?
As the credit crunch continues to tighten, an old name is beginning to find itself back at the front of the pack. FHA loans have been around since the 1930’s and after playing second fiddle to conventional loans in the late 1990’s and 2000’s, they are back.
FHA (the Federal Housing Administration) does not make mortgage loans, they insure them. This insurance minimizes the risk for default that lenders face when buyers have less than a 20 percent down payment.
In the past, FHA loans had fallen behind conventional loans because they were restricted by a maximum amount that you could borrow. Currently, for this area, that amount is $271,050. However, by the end of this month that amount could be bumped to the conventional limit of $417,000.
What does this all mean for you, the homebuyer? FHA can now offer you what a conventional loan offers, and more, in some cases.
First, FHA is great for those with less than perfect credit. FICO scores aren’t as pivotal, and bankruptcy and foreclosures are not deal killers for those trying to qualify for an FHA loan.
FHA loans offer rates that are typically within .125% of the conventional conforming interest rate. Borrowers can put as little as 3% down, and in some cases, through a non-profit organization, can have that down- payment gifted to them.
FHA loans are just another excellent option for you to look into when buying a home. Contact your mortgage professional and get the details on how it can help you save money.
