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What Is An FHA Mortgage Loan?

Many people don’t understand U.S. Government Backed Loans.  They almost always ask “What is  a FHA mortgage loan?”.  With all the government programs like Fannie-Mae, Ginnie-Mae, Freddie-Mac, etc., that’s not a surprise.

Imagine Having Your Own Home for You and Your Family -- That's What Having a Mortgage Can Do for You

Imagine Having Your Own Home for You and Your Family -- That's What Having a Mortgage Can Do for You

First, as I mentioned in the previous article, the Federal Housing Authority (FHA) does not actually issue loans. What they really do is to insure the loans that mortgage lenders issue to remove the risk associated with the loan through US-Government guarantees. Basically, it’s an insurance policy to make sure the lender doesn’t lose money on your loan because of your failure to make your mortgage payments.

In this way, they make it a lot easier for ordinary people like you and me to get an FHA home loan (FHA mortgage loan). Plus, if the lender wants to make easy, risk-free profit from an FHA mortgage loan, they must follow the FHA’s rules. And that’s definitely a good thing because the rules are almost always fair to slightly in the buyer’s favor.

FHA loans are much easier to get (qualify for). Many people believe that only first-time home buyers are able to get an FHA home loan. This is not true. FHA insured loans just make it easier for first-time home buyers to get loans but anyone can apply.

So, if you have had significant credit problems in the past, such as a bankruptcy or a foreclosure, you may still be able to get an FHA Loan without too much trouble. Usually, the FHA requires that a certain amount of time, typically 2 or 3 years, to have passed before you can apply and you will have had to have kept your nose clean (i.e. reestablished credit or totally avoided using credit) since the problem.

Also, they will listen to arguments about extenuating circumstances that make the credit problems not your fault. Plus, if they deny your loan you can, in certain circumstances, appeal their decision denying your loan.

Plus, they require the SELLER to provide a property which meets certain, minimum standards, except in specific circumstances such as the purchase of “HUD” homes.

The most popular FHA loan is a 203(b) FHA Guaranteed Loan. This loan will permit the buyer to get a fixed-rate mortgage with only about 3.5% down. The down payment percentage varies from time to time. A really nice feature of this type of loan guarantee is that up to 100% of the money that you will need at closing may be a gift from a relative or money that you obtain from a government agency or other non-profit organization such as your church.

Another program that the FHA offers is what is called a “Rehab Loan.” The actual designation for this type of loan is the FHA 203-K Rehab Loan. This is for properties that require renovation or significant repair. It’s becoming quite common for thieves to strip the copper wire or plumbing out of a house in some neighborhoods. This type of loan can help with problems like that.

In some Rehab Loan situations, such as the purchase of a HUD-offered home it is possible to get a 203-K Rehab Loan along with the 203(b) FHA loan to help with the repair of the property. An example would be if the wiring or plumbing has been stripped from the home that you want to buy and it is a HUD-offered property, you might be able to get a 203-K loan along with you 203(b) FHA guaranteed loan so you can bring the property up to FHA standards when you buy the property.

The FHA has a lot of different programs for home buyers who might be looking at difficulty getting a conventional mortgage. Here’s a list. Click the link below or find the article about the type of FHA Loan you are interested in under the “The Basics” menu near the top of this page.

If you have a job or regular income, the Federal and even State Governments have a lot of programs that may help you. I know what it is like to cry myself to sleep because I felt so hopeless that I didn’t know what to do about my situation.

The best solution to feeling hopeless is to…

… Don’t assume that you will fail.

… Take action!

… Read everything that I’ve written about getting a mortgage loan (home loan) and take the links to other sites with more information that I give you.

… Go through the process.

… Complete the forms for each of the lenders that I list in the side columns on this site. Talk to anyone who calls about it… Answer their e-mails. Please, apply good judgment as to who you talk to and answer.

Absolutely do not commit to anything until you are sure that that is what you want to do. AVOID PEOPLE WHO CALL YOU AND SAY THAT THEY ARE CONSULTANTS OR LAWYERS AND CAN GET YOU WHAT YOU WANT. Legitimate lenders may contact you and they will almost always be calling in response to a form that you completed. They will NEVER be fishing for information that you have already provided.

DO NOT GIVE ANYONE MONEY unless you are absolutely certain that you want to work with that lender or person and that you will get what you are paying for.

When you learn what I teach on this site, you may discover that you actually know enough about how to get an FHA home loan that you really can get one!