What is the FHA?

The FHA is the common name for the Federal Housing Administration. They do not lend to the consumer but instead provide mortgage insurance to approved lenders so that the lenders are able to offer certain loan products to more borrowers. In actuality, even though you often hear about FHA loans as if the money comes from the Federal Housing Administration, they are actually certain products from approved lenders guaranteed by the Federal Housing Administration.

Types of FHA Loans

There are FHA mortgage financing products for purchasing homes and refinancing products that allow you to get a better interest rate than a current mortgage or take advantage of equity in a home you already own. FHA Refinancing products have become extremely popular in the last few years. Most are designed to reward homeowners who have improved their credit and whose homes have accrued in value since the initial purchase with a lower rate and, therefore, cheaper monthly payments. There are FHA loans of this type available, including Streamline products, with less paperwork and qualifying conditions, for those already using a Federal Housing Authority loan. FHASecure loans have recently been introduced to help families who find themselves with a bad adjustable rate mortgage product.

Understanding FHA Mortgage Financing

The FHA offers two basic types of home mortgages. Traditional loans have 15 or 30 year terms (the amount of time it will take to repay the loan) and keep a single interest rate the entire life of the loan. Buyers can use these products to finance up to 97% of the purchase price of a house. Adjustable rate loans have a lowered interest rate for the first two or three years. These products are designed for families that need homes but also need to keep their initial payments low. The assumption is that after this time period when the rate raises the family will be financially secure enough to either handle the new payments or refinance.