Does An FHA Loan Make Sense For You?

Since the Great Depression the Federal Housing Administration has been insuring mortgage loans so that millions of Americans could purchase a home. The original purpose of the FHA was to ease the debts and amount of loans in default during the Great Depression, but later it was mainly used by Americans who could not otherwise afford a house or obtain a useful mortgage. The way FHA housing loans work is by insuring the lender against the possibility of the borrower defaulting on, or failing to pay, their mortgage. As long as the borrower meets the flexible requirements of an FHA mortgage, the next step is to find an FHA-approved lender who will take the loan application, process the loan application, and close the loan itself.

The FHA loan qualifications are less stringent than most prime mortgage loans. For one, the borrower must have a reasonably good credit history, with no bankruptcies in the last two years, no foreclosures in the last three years, and two or fewer "30 day late" monthly payments in the last two years. In addition to an adequate credit background, applicants must be able to make a down payment (usually less than 3%) and the mortgage payments must amount to around 30% of the borrower's income. Be sure to check out this information on FHA loan rates to learn more.

FHA loans do have limits, and "jumbo" loans are not normally available in the normal sense. The upper echelon for FHA loans sets a limit of $417,000 for some high cost areas.

Currently the FHA is working on raising it’s limits on FHA Loans to help keep the subprime market low. With all the subprime loans out the country is seeing increases across the board on foreclosures. Foreclosures rates are up in quite a few states including Nevada and Colorado. These individuals are being foreclosed upon because of the high risk subprime loans which are making them late on payments.

There is also a 3% down payment which is required. The FHA is also in the works to eliminate any kind of FHA down payment. With the down payment being eliminated there should be less FHA grants issued.

Check out FHA.MortgageLoanPlace.com to learn more and see if an FHA home loan is right for you and your family.