The Ins and outs of a FHA Loan
FHA is abbreviated for the Federal Housing Administration. Congress created FHA in 1934 to assist home buyers in getting a mortgage. A single or multifamily can qualify to have their loan insured by FHA. The insurance provided by FHA gives the financial institution protection on the mortgage in case the FHA homeowner defaults on their loan. A private lender issues the loan itself, although FHA insures it. There are requirements that the loan must meet for FHA to approve it. FHA and HUD are responsible for ensuring over 34 million homes since 1934 and are by far the largest insurer of mortgages in the world. The loan amount for a single-family is generally $200,000-$250,000.If you are interested in getting a FHA loan it is good to have at least two years of consistent employment in the same field. A good rule of thumb is to keep your loan payments around 30% of your actual income. Your credit cards, mortgage, homeowners insurance, and auto payments should not be more than 41% of your actual income. You can have no more than one federally insured loan at a time. If you have had a foreclosure or bankruptcy it must have been at least two years ago with re-established credit. If you have a delinquency in a student loan you are disqualified for the loan.
An advantage to a FHA loan is that your down payment is low, typically 3% or less. Financial institutions can often compete with a FHA loan. Ask your lender for other options that might be available to you. Consider all possibilities and make an educated decision on the right loan for you.
Contributing National Staff Writer
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