FHA Home Loans
Until recently, many people may have never heard about Federal Housing Administration loans, or FHA loans, as they are more commonly called. Over the past decade the popularity of FHA loans has been eclipsed by easy-to-obtain subprime loans. The fact of the matter is that FHA loans are also reasonably easy to obtain, but subprime loans made fantastic promises that seemed too good to be true. It has come to light that many of these offers weren't what they seemed and FHA loans have been getting substantially more attention.
The Federal Housing Administration was formed in 1934 in an effort to help low- to moderate-income families become homeowners. Over the years, the FHA has been responsible for originating nearly 34 million loans. What makes FHA loans unique is that the government is not actually lending the money. The money is provided by a conventional lender, the government just insures the loan. This means that if the borrower is ever unable to repay on the loan, the government is promising that the lender will still receive the money owed.
Because of this guarantee, individuals who would normally have difficulty obtaining a loan can still receive one. In fact, the FHA has no minimum credit score. Instead, factors such as employment history, income, and utilities payments are used to decide if an individual is a good candidate for an FHA loan. Currently, FHA loans require a minimum 3% down payment, but this may be changing in the near future. Legislation to modernize the FHA program would result in no down payments, higher loan limits, 40-year loans, and a risk based insurance structure. Proponents of FHA feel that this reform would bring the FHA program back to the place it held in the market prior to the subprime boom, and even elevate it beyond that.
Recently the FHA came out with a new program called the FHASecure Program. You can read more about by visiting the FHA Mortgage Center.
Find information here about the current FHA Loan Limits.