1. Understanding FHA Loans
For many of those who are not directly involved in the industry, home loans and mortgages can be
difficult to understand. Furthermore, the various options and specific details of all the available loan
types and home financing options can cause even more confusion among people.
One such home loan type that can cause confusion for many people is the FHA loan form of home
mortgage. Because the FHA loans are not overly common on the housing marketplace, and because not
all lenders are approved to carry the option of a FHA loan, there are many people who may not know
about FHA home loans and their specific advantages.
What an FHA Loan Is
First, before looking at the advantages of a FHA home loan, a person must understand and know what
exactly a FHA home loan is. A FHA home loan is a mortgage home loan that is offered by independently
approved lenders of FHA home loans which loans are insured by the
Federal Housing Administration.
Being insured by the federal government means that lenders of FHA
home loans are able to take bigger risks while loaning their money to
an individual for a mortgage loan, which in turn makes it possible for
lenders to offer better deals to homeowners who apply for the FHA
home loan. The FHA home loan program was developed and instituted
following the Great Depression which caused many homeowners to
default on their mortgages and caused a wide sweeping trend of
foreclosures and homeless families.
The successful design of the FHA home loan program enabled home
loans to become more affordable and more accessible to home buyers by lessening the risk to lenders
through federal insurance. In other words, once the federal government was able to financially back up
the funds of lenders of home loans, these lenders were able to make their home loans more affordable
and easier to gain approval by everyday individuals.
Advantages of FHA Loans
One of the great advantages of a FHA home loan is that, again thanks to
being financially backed up by the federal government, lenders are now able
to offer FHA home loans with a lower down payment that regular home
loans are able to provide. For comparison, a regular home loan down
payment is typically around twenty percent of the total loan, which can be in
the tens of thousands of dollars and therefore out of reach of would-be
homebuyers, while the down payment of a FHA home loan is a minimal
three and a half percent, which down payment totals in the more easily
affordable thousands of dollars range.
2. While there are advantages and disadvantages to everything, including FHA home loans, a person or a
prospective home buyer cannot begin to make the right decision for their personal home loan needs
until they have all the facts before them and have been educated on the various pros and cons of every
home loan possibility. For this reason, a prospective homeowner should investigate different home loan
options, including and especially a FHA home loan because of its great advantages, before making a
decision on which type of home loan they will apply for to receive financing for their new home.
Photo Credit: kjeldberg, TALUDA
