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Fha Loan Mortgage - FHA Loan Mortgages Help Lenders and Buyers

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The Federal Housing Administration (FHA) is a federal entity inside the Housing and Urban Development (HUD) arm of the government. An FHA mortgage loan is one of the most desirable types to have since the interest rates can be lower on an FHA mortgage and down payments less than for a conforming or nonconforming loan. An FHA loan mortgage is actually a loan made by a private lender and insured by the FHA. The FHA does not generate any loans.

When the FHA insures a loan, the government guarantees the loan that the lender is making in case the borrower defaults. Since the risk is low for the lender, he may offer a lower interest rate. Interest rates are established by the degree of risk that the lending institution takes when loaning money and with FHA insurance, the bank has virtually no risk.

FHA mortgage loans are made on properties whose mortgage amounts are under a certain level, which is determined on a market-by-market basis and can vary even within states. Expensive housing markets like San Francisco, New York, and Los Angeles have higher limits than markets with more reasonable housing prices like Phoenix or Denver. The FHA will insure different types of loans. The most popular is the 30-year fixed rate, and they will also insure adjustable rate mortgages (ARMs).

People who are buying a home can use any lender they want to get an FHA home mortgage loan as long as the lender works with the FHA. Almost all real estate agents use lenders with whom they have a relationship, but the buyer is not bound to their lenders. When buying a new home, the builder may offer incentives or discounts if the buyer chooses the lenders that their company works with. No matter which lender the buyer chooses, the borrower will have to fill out all the forms and provide the documentation required for the loan approval process.

An FHA mortgage loan also requires a lower down payment than a conventional loan. The rates vary from 3% for first time buyers to 10% for borrowers who have FICO scores lower than 585. The borrower will also have to pay private mortgage insurance (PMI) on the dwelling until the equity in the home reaches 20% of the purchase price. When borrowers pay more than 20% down, they will not need PMI on an FHA loan mortgage. Investors cannot get FHA loans for investment properties. All homes that the FHA guarantees the loans for have to be occupied by the original borrower.

Under the FHA home mortgage loan program, all single-family properties are eligible for the FHA loan insurance if the homes are below the FHA ceiling for that market. Attached properties, on the other hand, must be approved by FHA on an individual basis to receive approval to generate FHA loans on units within them. Condominiums and townhome projects have strict requirements for approval.

Once the projects are approved by FHA, the institution can only guarantee loans on 30 percent of the units within a project. The FHA will not consider projects where more than 10 percent of the units are owned by an investor. The FHA loan mortgage cannot be generated on an attached project until 50 percent of the homes have been sold. Just as with the detached single-family homes, FHA will only guarantee loans for owner-occupied units.

The FHA’s website can be found at www.hud.gov. Both of these agencies want to make home ownership available to anyone who wants to own a home and can afford it

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