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FHA Mortgage Loans

There has been much discussion recently regarding FHA mortgage loans. It is important to understand that although the U.S. Federal Government is involved with FHA (Federal Housing Administration) mortgage loans, they are NOT actually the lender. They are, however, responsible for the mortgage insurance that guarantees such loans for the indvidual lenders (the bank or mortgage company). There are literally hundreds of lenders who are able to secure an FHA mortgage loan, located in all states and areas of the U.S. As an advantage to the borrower (since they are less likely to get themselves over their heads in mortgage payments), the standards for FHA loans are usually a bit more stringent than for other types of mortgage loans. Contrary to some common misconceptions, FHA loans are not just for first-time home buyers. You cannot, however, have more than one FHA loan at any given time.

History of FHA Loans

The FHA is definitely not a new program, having been in place for over 70 years, created by the National Housing Act of 1934. There have been a number of modifications to the program over the years but the goal remains the same: Making housing more affordable for millions of potential American home buyers.

Types of FHA Loans

For new or resale home purchasers, FHA loans are available in both fixed and adjustable rates. These loans are available in both 15-year and 30-year terms. Rates are set by the individual lender so they can vary from provider to provider. FHA mortgage loans are available for single family, condominium or townhouse purchases. With certain limitations, you could purchase a duplex and live in one side and rent out the other side.

Qualifying Ratios

In general, FHA qualifying ratios are more stringent than many other types of mortgage loans. Your maximum debt-to-income ratio (your monthly debt versus the amount of income you are bringing in) is set at 29% for the mortgage payment alone and 41% for the total of ALL your debt (credit cards, student loans, car loans, personal loans, etc.). Normal monthly payments such as utilities, food costs and the like are not considered when factoring your debt to income ratios.

Lending Limits

FHA lending limits (the maximum amount you will be able to borrow) vary a good bit and are determined for each locality. If you are considering an FHA mortgage, it is important, then, to determine your maximum exposure before you begin the process of searching for a specific property.

Applying for an FHA Mortgage Loan

Application for an FHA loan is generally not any more complicated or time consuming than application for any mortgage loan. You can do much of the work online, submitting information as needed.