FHA Financing

What is an FHA Loan?

An FHA loan is a mortgage insured by the Federal Housing Administration (FHA), which is within the U.S. Department of Housing and Urban Development (HUD). It is offered through various mortgage lenders who have been approved by the government agency.

Established in the early 20th century as a part of the National Housing Act of 1934, the FHA offers an alternative option to the conventional mortgage loan. These loans make it easier for borrowers to achieve their dream of home-ownership, as they tend to have more flexible qualification requirements.

With An FHA Loan:

• The loan limits vary from state to state—even county to county. It’s not a one-size-fits-all system. On the FHA’s official website, you can easily find out the mortgage limits for your area. You also have the option of contacting a local lender for additional information.
• You can assume the mortgage from a seller. Not all home loans are assumable, but FHA loans are. This means you are able to acquire a seller’s FHA loan when buying the property from him or her, which could be beneficial for both parties.
• There is no longer a prepayment penalty, as of January 21, 2015. The updated regulation “allows mortgagees to charge interest only through the date the mortgage is paid, and prohibits the charging of interest beyond that date,” HUD explains.
• Gifts are an “acceptable source of funds.” For such capital to be deemed a gift, “there must be no expected or implied repayment of the funds to the donor by the borrower,” as HUD describes. There are other stipulations to keep in mind, as well. You can learn more about them via the HUD official website or by contacting an FHA-approved lender.