FHA Mortgage Loan - What is a FHA Mortgage Loan?

Right now, FHA mortgage loan is undoubtedly the most popular type of loan in the market.
This kind of attention had not been seen in the past few years but due to the recent credit crisis, a lot of new home buyers are flocking to obtain this new loan.
The government agency that is tasked to oversee the handing out of this type of loan is the Federal Housing Administration.
It was created in 1934 in the midst of Great Depression to provide loans to low and middle income bracket families at affordable terms.
But it should be known that what the FHA does is to insure FHA loan, not lend the loan itself.
Most people coming from the low and middle income brackets are often encouraged to obtain this type of loan so that they would be sure that the terms of loan they are going into would not be detrimental to their advantage.
In fact that is one of the main objectives why the FHA was created: to help these people to be able to their dream home without too much cost.
Another main objective of the FHA is to also protect the lenders.
Most lenders would be keen on lending borrowers FHA housing loan because they are more secure that on the event the loan defaults, they could get an insurance claim.
But of course, FHA loans are very beneficial to borrowers.
Because these loans are insured, private lenders can easily cut down interest rates on these loans unlike with those offering conventional loans that most of the time is not insured.
FHA mortgage loan are often being offered as an adjustable rate mortgage (ARM) loans or a 30-year fixed term loan.
But in the case of ARM loans, lenders would prefer a 1-year constant maturity index during which the interest rates are being rescheduled.
One known advantages of obtaining a FHA loan is that it has the lowest minimum down payment required among all other loan types.
It would usually require only 3.
5% of the total loan amount as a down payment compared to other loan types which requires the borrower to shell out 10-15% of the loan amount as a down payment.
It also has low miscellaneous fees, zero pre-payment penalties and insurance premiums.
What is also great about is that there are no hidden charges that would make you wonder why your mortgage payments are going up - unlike conventional loans and other type of mortgage loans which usually imposes lots of hidden charges that adds up a lot to the amount being paid and thus would often result in foreclosures or defaulting of the loan.
In terms of the requirements needed to obtain FHA mortgage loan, it has lesser requirements needed unlike conventional loans.
But of course they are strict in determining if the borrower is indeed capable of paying the loan.
This is usually known by presenting documents like their credit history and proof of income sources.
If the borrower has a bad credit standing, they could still get a loan but with certain conditions.
Aside from this, FHA loan can also be used in acquisition or home improvement projects.