FHA Financing

What does FHA stand for?

You may have heard the term FHA used before, but did you know that FHA financing is one of the most popular ways to achieve homeownership today? In fact, it's easier for more people to purchase their first home with the help of the FHA.

FHA stands for the Federal Housing Administration, which was enacted by the federal government to stimulate affordable housing nationwide.

FHA vs. Conventional Financing

Although there are many similarities between FHA and Conventional loan programs, there are some differences as well. The major difference is that FHA allows for borrowers with less than perfect credit to receive a loan approval that otherwise might not qualify under Conventional credit guidelines. And contrary to what you may have heard, FHA interest rates are just as competitive as Conventional loan rates.

In addition to relaxed credit guidelines, the FHA down payment requirement is substantially less than Conventional loan programs. While most banks require at least a 5% down payment on single family homes and 10 - 25% down on multifamily homes, the FHA allows for as little 3.5% down on 1-4 family homes.  (It should be noted that FHA loans are available for owner occupied properties only - not investors).

Another highlight is that the FHA allows the entire down payment to be gifted from a family member while Conventional loan programs do not allow for gifts for the initial 5% down payment.

How Do I Find Out if I Qualify for FHA Financing?

The FHA does not lend directly to consumers. To obtain FHA financing you must apply with a lender that is approved to offer FHA loans. Contact your local HUD office for a list of approved lenders nearest you.

Whether to select an FHA loan or a Conventional loan depends on your personal needs and qualifications.  Your lending partner should be able to provide you with the pros and cons for each.

Learn more about the FHA loan program by attending Homeownership Now.  Click here to register.

This information was provided courtesy of My Way Home member, American United Mortgage Corporation, a provider of FHA home loans.