Launched in 1934 to help boost the housing market, the Federal Housing Administration (FHA) loan is still pretty much the same today. It’s a government-backed loan that allows people to buy a moderately priced home with a down payment as low as 3.5 percent. The partnership between the FHA and HUD has helped many people since its inception, insuring over 34 million home mortgages and 47,205 multifamily project mortgages. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. Note that the FHA has maximum mortgage limits based on the place you live. To find out how much house you can buy with an FHA loan use LendingTree’s FHA loan limit tool. In the 80 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world.
The government doesn’t actually lend the money, but it does insure the mortgages. That way, if the borrower can’t repay the loan, the FHA insurance reimburses the lender. This allows mortgage lenders to offer loans to less affluent applicants who might otherwise be denied.
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Check your credit history. Make sure it is accurate and see if there are any problems you can clear up before applying for a loan.
Start saving for a down payment. FHA loans only require a down payment of 3.5 percent, though if you can afford a larger one it will lower your long-term costs.
Figure out your housing budget. A combination of how much you can put aside monthly towards a down payment plus your current rental costs, if applicable, is a good indicator of how much of a monthly mortgage payment you’ll be able to afford.
Compare loan rates. LendingTree’s FHA page will show you some current loan rates and the site also provides you with the means to get competing loan rates in minutes.