Mortgages

FHA (Federal Housing Authority)

An FHA loan is a loan insured against default by the FHA. In other words, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults – the FHA will pay. Because of this guarantee, lenders are willing to make large mortgage loans.

Almost anybody can get an FHA loan. There are no income limits – like you may find with first time home buyer programs. However, there are limits on how much you can borrow. In general, you’re limited to relatively small mortgage loans relative to home prices in your area.

FHA loans offer a few other bells and whistles:

  • Easier to use gifts for down payment and closing costs
  • No prepayment penalty (a big plus for subprime borrowers)
  • An FHA loan may be assumable
  • Possible leniency during financial hard times
  • Funding for home improvement (through FHA 203k programs)