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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.

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

Understanding fha loans  

FHA loans can be difficult to understand this article will help you to know the important points of FHA Loans

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