The FHA, or Federal Housing Administration, provides mortgage insurance on loans made by FHA-approved lenders. By doing so, it essentially reduces the amount of risk that a lender would otherwise be exposed to by someone hoping to get a loan for very little money down and with an uncertain credit history.
Fully Understand Your Mortgage Requirements
When you take a moment to fully understand the guidelines and requirements that go into getting approved for a mortgage, you’ll quickly understand that the mortgage industry is a major financial sector within the US economy. To support this, the federal government created several programs to better enable citizens to own property.
These programs, known as government sponsored entities, include:
- Government National Mortgage Association commonly referred to as “Ginnie Mae,”
- Federal National Mortgage Association, also referred to as “Fannie Mae,” and
- Federal Home Loan Mortgage Corporation which you may know as “Freddie Mac.”
Ginnie Mae is the program that is a wholly owned entity of the US Department of Housing and Urban Development (HUD). This program’s mission is specifically to improve and expand affordable housing. The program did this by originally providing an insurance product for bonds issued by FHA and VA mortgages.
Today, FHA insures home loans on single family and multi-family homes throughout the United States and its territories. Insuring tens of millions of properties since 1934, FHA loan are increasingly popular among millennials.
FHA Guidelines To Learn More About
FHA insured loans require mortgage insurance to protect lenders against losses that result from defaults on home mortgages. Some basic guidelines and topics that you should learn about are listed below:
Why people get FHA loans
Because of that insurance, lenders can — and do — offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements.
- For some, the FHA allows buyers to get a mortgage as their only option
- For others, the FHA may help get a down payment as low as 3.5%
- The FHA underwriting requirements are less strict than conventional loans
- FHA loans help give options to people with less than excellent credit
- FHA refinance loans may give options to those with sub-prime mortgages
- A FHA mortgage is a generally affordable home loan choice
- The program insures the lender, reducing risk in the transaction
