FHA Loans Explained

Federal Housing Administration (FHA) Loans are home loans insured by the Federal Housing Administration. FHA insured loans are very attactive for number of reasons. Anyone can qualify for a FHA loan, but these loans are designed for and are most appealing to low- to middle-income families -- especially first time home buyers.

FHA loans are loans insured by the Federal Housing Administration. The FHA is not a lender itself. You still need to go through a traditional FHA approved lender.

FHA loans allow hopefully homeowners with lower credit scores to secure home loans. Usually you can secure a home mortgage with a credit score not lower than 500. FHA insured loans also require lower down-payments usually as low as 3.5%. Traditional mortgage down payments can be upwards of 10%. Additionally FHA loans typically have lower fixed-rate interest rates. FHA insured loans represent a lower risk to the lending company so they are willing to offer more attractive rates.

FHA Loans seem great, but there is a downside. You must pay annual insurance premiums that are between 0.4% and 0.8% depending on the price of the home. Additionally, there are maximum loan limits the vary by region. Most FHA loan limits in rural areas are around $200,000 to $300,000. In more expensive urban areas the limits are as high as $600,000. These limits are reasonable but can still restrict you buying power.

Overall, FHA loans are very attractive to first time home owners, anyone with a lower credit score, and people with low- to middle-incomes. If you fit that description and are looking to buy a home, federally backed mortgage insurance may be right for you.

Learn more about FHA Loans on Click here to lookup FHA Loan Limits in your area.