FHA Loans  

- Anita Johnston

The FHA helps people that for some reason cannot purchase a home through a conventional loan. Whether a person has bad credit, a bankruptcy, a foreclosure, no credit, or are just short of cash, a FHA loan can get them into their dream home.

Through FHA loans, many people that never thought they could ever own a home are now living their dream in a home they chose. However, you must remember, that FHA does not give you a home loan; they guarantee they will pay a certain amount of your loan in case you default on the loan to your lender.

At the time of this writing, the FHA is insuring over 800,000 home loans. Since this agency was created during the depression in 1934, it has helped over 33 million people achieve their dream of home ownership. This program encourages lenders to take a chance on people that they would otherwise turn down, because of some thing on the credit report. For an FHA loan, your credit report is not even considered at all, thus aiding people with bad credit the same opportunity for purchasing a home as someone with excellent credit.

With an FHA loan you will not have to come up with a large down payment of 5%, 10% or in some cases 20%. Normally, FHA asks that the down payment be 3% of the total purchase value of the home. What the FHA does look at when considering you for a loan is that you have income to pay for the loan and the monthly installments they go on ratio requirements. However, if you are self employed this can become very tough to prove as you do not receive W-2’s. It is harder to verify your income if you do not have some type of proof of your monthly and yearly income.

Not only will the FHA look at your income, but they will also look over the home you wish to purchase. They do a very extensive inspection that will cost the seller more money. Many times, this causes the seller to take a second look at accepting an offer when it is backed by the FHA. This can surmount to quite a bit of money when they begin to inspect the foundation, plumbing, and other areas of the home.

You should also know that not every lender is approved by the FHA. This means you cannot just choose any lending company if you wish to have a FHA home loan.

Remember, though, FHA can and will help you purchase a home as long as you do not mind going the extra mile and coming up with all the paperwork and at least 3% percent down.