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What exactly is an FHA loan?

Posted on June 27, 2013 by editor in blog

FHA, or the Federal Housing Administration, was established in 1934 by the Federal Government.  It was not created to lend money, but created to “insure” loans made by approved lenders, such as Mortgage Master.   If a customer obtains an FHA loan and later defaults on it, the lender is compensated by FHA and will not lose as much money.  Therefore, lenders are more willing to lend with inviting terms and slightly loosened guidelines, as compared to Conventional loans.

Originally, FHA backed loans were considered to be a first–time buyer program.  Today, FHA loans are one of the most popular types of loans for all types of borrowers.  This is because their programs have lower down payment requirements (3.5% down payment), lower credit requirements than Conventional loan programs, and lend with higher loan limits.  Also, the full down payment can be a gift from a family member.  To offer such terms, FHA charges an Upfront Mortgage Insurance Premium which can be financed into the loan or paid in full upfront by the borrower, seller or lender.  They also include a monthly reduced Mortgage Insurance payment option for this Premium as well.

Feel free to contact me for additional information regarding FHA financing, or any other type of loan product.  I am happy to help.


Mike Amaro




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