| What is an FHA loan? Simply put, this type of loan is | | | | percentage points. For the question of what is an FHA |
| one that has the insurance from the federal | | | | loan, homebuyers need to have a good understanding |
| government to protect lenders. FHA is a part of the | | | | of these two programs, choosing the one that fits |
| government entity called HUD, which stands for the | | | | them best. |
| Department of Housing and Urban Development. Unlike | | | | Another aspect of the question, what is an FHA loan, |
| conventional mortgage loans, FHA programs are | | | | is the rehabilitation program. For this, a property owner |
| designed to help certain people become homeowners. | | | | could take out an FHA 203K loan, which consists of |
| One answer to the question is that it is a | | | | money specifically for the rehabilitation of dwellings. |
| government-backed loan, only requires a down | | | | The way this program works is that the mortgage and |
| payment between 3% and 3.5%, a loan that is ideal for | | | | cost of rehabilitation are combined. Then, the amount |
| first time buyers, and a loan that can help people that | | | | of the mortgage would be based on the expected |
| have bad credit. In other words, for people that might | | | | property value once all repairs have been completed. |
| not otherwise be able to purchase a home with a | | | | This program was designed to make it easier to |
| conventional loan, an FHA loan is a good option. | | | | rehabilitate homes that would improve the overall |
| Another part of the question "What is an FHA loan" | | | | livelihood of communities and neighborhoods across |
| has to do with the various types of programs available. | | | | the country. Instead of the homebuyer taking out |
| These loans are usually Fixed Rate Mortgages or | | | | numerous loans to purchase the home and make |
| FRMs. In this case, the interest rate being charged | | | | repairs, they only take out one loan to cover the |
| would remain the same throughout the life of the loan. | | | | rehabilitation process. |
| Therefore, people have a set payment from day one, | | | | Whether you are a , have less than stellar credit or |
| which makes budgeting a little bit easier. | | | | simply want to purchase a home in need of |
| These loans are also offered as Adjustable Rate | | | | rehabilitation, there is an FHA loan available to you. The |
| Mortgages or ARMs. While the initial interest rate on | | | | application process can be made simple and there is |
| this particular program is low, which means the monthly | | | | the option of refinancing the FHA loan in the future |
| payment is also low. But, over the course of the loan, | | | | should your current financial situation change or you |
| interest would increase, as would the payment amount. | | | | want to take advantage of the home's equity in the |
| However, these loans are locked into a cap so if | | | | future. In addition, the FHA loan limits have been |
| interest rates climb, interest on the loan would have | | | | increased, which is allowing people to purchase homes |
| limitations. These loans typically only fluctuate by 5 to 6 | | | | that they may have not considered an option. |