FHA Loan Requirements - What is FHA Loan

The current events seem to tell us that this is not the right time for us to get a loan to build our dream home. But that should not be the case. We should not be discouraged as long as we have been properly informed with our choices and our options on where to get our loans. To help you with your discernment, let me tell and compare you on two of the most commonly known loans that are being used: conventional loans vs. FHA loans.

For the past few years, most people are leaving out conventional loans vs. FHA loans. FHA is a lot more popular than the latter. But why is that? Let us enumerate the differences between the two.

Conventional loans are usually given by private lenders such as banks or mortgage companies. But such loans are usually imposed high interest rates by these companies. But to enable these companies to lend loans to home owners and buyers at much affordable rates, the US government created the Fannie Mae and Freddie Mac. These are called GSE or government sponsored enterprises and are funded with federal money that they would be lending to these private institutions to ensure stability and liquidity in the mortgage and housing market.

The guidelines of conventional loans vs. FHA loans are a lot stricter. FHA would only require the borrower to pay a 3.5% minimum down payment whereas private lenders giving out conventional loans require a borrower to pay a minimum down payment ranging from 5 to 10 percent.
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From all the available home financing loans available in the market today, the easiest one to comply all the requirements with is the FHA loan restriction. These loans are insured by the Federal Housing Administration of FHA to help most Americans that belong to the lower income brackets who cannot qualify for conventional home loans. Now, because of the current credit crunch, the FHA had announced a lot of changes that would really help millions of Americans had been badly hit by the housing crisis and the worst recession this country had seen in the past few decades.

One good thing on the FHA loan restriction for income is that they don’t require you to have a minimum income for obtaining a loan. But it is important to keep in mind that you must be able to prove that you have a steady and stable source of income for the past three years.

Some of the allowable income sources that you can determine would be Social Security income, retirement pension payments, child support and even unemployment compensation! It could also come from a part-time job or from quarterly or yearly bonuses that you receive as long as it is sufficient and are steady.

They will also require you to present your billing statements, whether on utilities like electricity or credit cards, so it is a must that you had been able to pay these bills on time.
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The Federal Housing Administration (FHA), which administers to several of single-family mortgage insurance programs or the FHA loan insurance, is a part of the Department of Housing and Urban Development (HUD). These programs work through FHA-authorized lending institutions that submit applications to have a property appraised and have the actual buyer’s credit approved. Said lenders funds the mortgage loans that the Department insures. Note that HUD doesn’t make direct loans to people to help them buy homes.

Section 203(k) program or the FHA loan insurance is HUD’s primary program mainly for the rehabilitation and/or repair of single-family property. It is a very important tool for both the community and neighborhood’s revitalization and also for the ever growing homeownership opportunities. These are the main goals of HUD; said Department believes that the FHA loan insurance is rather a very important program.

A lot of lenders who have successfully used the FHA loan insurance of Section 203(k) program in partnership with the state and local housing agencies and non-profit organizations to rehabilitate properties. Said lenders, together with the state and local government agencies, found ways to put together Section 203(k) and other financial resources, these are HUD’s HOME, HOPE, and Community Development Block Grant Programs, for the very purpose of assisting borrowers. Some state housing finance agencies have created programs, to specifically to be used with Section 203(k). While, some lenders also use the expertise of said local housing agencies and non-profit organizations to help them manage the rehabilitation process.
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With the gloomy picture of our economy today, including the housing and mortgage markets, there is still one bright star that is becoming a lot more popular than ever for those who are still keen on having their dream home: FHA mortgage loan.

FHA mortgage loan is a mortgage loan introduced in the United States in the years of Great Depression that is insured by the Federal Housing Administration. In the past, this loan is often the last resort for borrowers whose applications had been rejected by private lenders offering conventional loans.

A lot of private lending corporations usually help borrowers to apply for a FHA loan. The good news is that just before the credit crunch finally took a hard blow at the housing market, mortgage limits for FHA mortgage loans had been increased at the start of 2008.

Despite being the so-called ‘poor man’s loan’ in the past few years, FHA loans had been generally popular among borrowers but the problem is that it isn’t available for everyone. FHA mortgage loan can only be availed by those coming from the low income brackets. These people usually would not qualify for a conventional home loan financing.
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