11 FHA Home Loan Facts You Should Know

FHA loans help make owning a home more easily available to Americans, but in order to benefit, you have to know a little about how they work and what's available.

What follows is a list of 11 FHA home loan facts you should know. Reviewing this list could help you identify your path towards home ownership.

11 FHA Home Loan Facts You Should Know

The Federal Housing Administration (FHA) is a division of the U.S Department of Housing and Urban Development. Here are 11 facts about their loan programs that might help you decide how you could benefit from an FHA loan:

  1. FHA loans can help you buy a house with little money down. With an FHA loan, you can make a down payment of as little as 3.5 percent. The one catch is that you will probably have to pay more mortgage insurance for loans with low down payments.
  2. FHA loans can help you qualify for a loan with a limited credit history. What the FHA does is provide mortgage insurance to help protect lenders against the possibility of borrowers defaulting on their loans. This protection gives lenders the confidence to make loans to people who haven't had the time to build up a long credit history.
  3. The FHA is the world's largest mortgage insurer. Since its inception more than 80 years ago, the FHA has insured more than 34 million properties. That should give you a feel for the scope of this program – FHA loans remain widely available throughout the ups and downs of the housing market.
  4. You can get an FHA loan from several sources. Because the FHA insures loans rather than lending money itself, you don't get your loan directly from the government. Instead, you can choose from a wide variety of independent participating FHA lenders. The availability of choice means you can shop around for better loan terms.
  5. FHA loans are available with fixed or adjustable interest rates. Borrowers generally prefer fixed interest rates, because these mean that your monthly payment will not change over the duration of the loan. However, for some specific situations – for example, if you anticipate moving or being able to pay off the loan within a few years – an adjustable-rate mortgage may be a better fit. FHA loans let you choose which you are more comfortable with given your circumstances.
  6. You can choose between 15 or 30-year loan terms. 30-year loans are more popular, because by stretching repayment out over a longer period, they lower the amount of the monthly payment. However, 15-year loans generally carry lower interest rates and also save you money because you only pay interest over half the number of years as for a 30-year loan. So, if you can afford to pay more each month, a 15-year loan should save you money in the long run. Fortunately, FHA loans let you choose which is best for you.
  7. Maximum FHA loan amounts range from $271,050 to $625,000, depending on how expensive the local real estate market is. The upper limits for FHA loans are based on the average cost of homes from area to area, so they adjust to how expensive your target market is. These local limits are revised from year to year, so they can adapt to fluctuations in real estate values.
  8. FHA loans can be used for small, multi-family properties as well as for individual residences. Residential properties with between one and four units are eligible for FHA loans.
  9. You can also use FHA loans for manufactured or mobile homes. This can include homes you place on property you own or homes you place in a mobile home park owned by someone else.
  10. FHA loans can help you refinance as well as buy a home. Even after you own your home, the FHA can help make your mortgage debt more manageable by providing refinancing opportunities.
  11. FHA loans can finance home improvements. Another way FHA loans can help existing home owners is by helping to make home improvement loans available. Check out the FHA's Title I loan program for more details.

FHA loans are there for the potential benefit of all Americans, and knowing these FHA home loan facts is the first step towards finding out how they can benefit you.

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