| The Federal Housing Administration (FHA) is behind | | | | your debt to income ratio. This would help the lender |
| many programs aimed at increasing home ownership | | | | determine the amount and the tenure of the loan that |
| in the United States. FHA was created by the National | | | | you are eligible for. Any individual can apply for a FHA |
| Housing Act of 1934 and its primary objective is to | | | | Loan and as long as the FHA approved lender is |
| promote growth of the housing industry through its loan | | | | happy with the credit history and you are willing to pay |
| insurance program. Before we get into details of how | | | | the FHA Insurance premium, you are likely to be a |
| to arrange such a loan, it would be wise to learn a bit | | | | successful applicant for an FHA Loan. |
| more about these Loans. Such loans protect the | | | | The most important thing to remember about these |
| lending institute in case the borrower is unable to | | | | loans is that the amount of money that you can |
| service the loan by making timely payments in | | | | borrow under such a loan is limited. This amount is |
| accordance with the terms and condition of the | | | | fixed by the Housing and Urban Development (HUD) |
| agreement. Before the FHA decides to insure the | | | | and one can easily find out the maximum amount of |
| lender, it does a through investigation of the credentials | | | | FHA loan that shall be allowed for a specific area by |
| of the buyer through the FHA Inspector. In case it finds | | | | going to the official website of the HUD. Hence if you |
| the risk-reward ratio favorable, it provides the | | | | are trying to borrow a small mortgage amount |
| necessary security to the lender by charging an FHA | | | | compared to the price of your property, an FHA loan |
| insurance premium from the borrower. | | | | could well suit your need. The biggest advantage of |
| So how does an individual get such a loan? Before we | | | | the FHA loans is that they allow the home buyers to |
| discuss this aspect it is important to recognize that | | | | purchase a house with a down payment of as low as |
| FHA does not provide loans and merely insures the | | | | 3%. |
| loan disbursed by a lender. The first step in obtaining | | | | Typically the home borrowers who make use of an |
| an FHA loan is to approach the lender or a mortgage | | | | FHA loan have to make an upfront insurance premium |
| broker who deals with FHA loans. The lenders who | | | | of 1.5% to pass their default risk to the FHA. The |
| are allowed to process FHA Loans is called an FHA | | | | borrower would be also expected to pay a small |
| qualified lender. The lending institute would then a credit | | | | monthly fee towards this insurance in his monthly |
| appraisal system very similar to that carried out in | | | | repayments to the lender. It would serve you better to |
| case of a conventional home loan. The most important | | | | compare the cost of FHA loan with that of a |
| parameters that the lending institute would review are | | | | conventional loan. |
| your credit history reflected in your credit score and | | | | |