The FHA Home Loan Explained
An FHA home loan is a loan that is issued by federally qualified lenders but what sets this loan apart from others is that it is a federal assistance mortgage loan. These loans are only offered in the United States and they are a great option for those that do not have the credit or the income to support the typical down payment that is associated with traditional loan programs.
Many people assume that when they get one of these loans that FHA is lending them the money, but this is not the case. When you have one of these loans FHA simply insures that the total mortgage will be paid to the lender if the buyer defaults on the loan. What this means is that a lender can lend money for the purchase or refinance of a home to those with less than perfect credit or those that cannot afford a traditional down payment without worrying that they will lose money if the buyer defaults. If the buyer defaults, the lender will recoup the losses from FHA.
FHA is an acronym for the Federal Housing Administration and the program was started during the Great Depression in the 1930s due to the fact that foreclosure rates were rising and lenders wanted some insurance that they would not lose out if a buyer could not pay on their home. Through this program many people were able to save their homes then, buy homes then, and the trend has continued over time with American's being able to buy homes that they would not have been able to buy otherwise.
There are a lot of benefits of using an FHA loan instead of a traditional loan. Millions of Americans have been able to take advantage of this type of loan program in the past and they are once again becoming very popular as many people looking for homes do not have a substantial down payment and lenders are looking for security due to a fluctuating economy.
While this type of loan is not right for everyone, a great portion of the population will find that there are some very appealing aspects to this type of loan. Before you assume that this is or is not the right type of loan for you, you should do some research and see if your needs, your credit history, and your goals could be met or helped along by this type of loan program. If you aren't sure, you can talk with your mortgage lender to see if you qualify for this type of loan or to see if it would be in your best interest to apply.
To get more information about a FHA home loan and it's differences compared to other loans visit our site at: http://www.refinance.com/
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