Insurance

Federal Housing Administration (FHA) has been a homebuyer's favorite since it was created by the Department of Housing and Urban Development. It was started with the purpose of helping first time buyers. FHA does not provide loans; it insures loans given by any private lenders. It helps the buyers, especially low income buyers, in buying affordable houses.

Contrary to the conventional mortgage companies which often ask for 20% of the purchase price as down payment, FHA requires only 3.5% as down payment, which includes the processing fee of the loan. If you wish to know the amount of mortgage credit you are eligible for, go through the HUD website and check your credit limit. If the price of the house that you are planning to buy is within this limit, FHA can insure the loan.

Additionally, lending institutions generally will not give you a loan for repairing the house that you are buying. Under FHA rules, repairing and restructuring of the house may also be financed. Amounts provided for repair is put in escrow account so that it can be used as per the requirement.

Another popular benefit of FHA is the reverse mortgage. A citizen above 62 years of age without any major source of income other than social security can do a reverse mortgage his house through the FHA if he has clear title. The citizen can stay in the house and get money during his lifetime to pay his medical bills etc. He would not be required to repay the loan as long as he stays there.

It is wise to make house energy efficient. FHA helps home owners in adding energy efficient features to the house. In this case too, a borrower needs a 3.5% down payment upfront and gets the rest 96.5% financed by a mortgage company.

Mobile or manufactured homes are increasingly popular. In a state like Florida, one third of the houses are mobile homes as the cost of living has made it more desirable. FHA loans are available to people who own the land to place their mobile homes on, or those who will place their mobile homes in mobile home parks.

A person may be eligible for an FHA insured loan even if he has a bad credit history or is in financial problems. It can also help an individual in buying a house after a discharge from bankruptcy. The FHA rates are most competitive and the mortgage terms are usually as straightforward as any basic mortgage, although there is always extra paperwork which must be signed at closing.

FHA insured loans are available to everyone, however, they are primarily used by the first time house buyers, buyers in lower and middle income groups and the buyers with poor credit ratings. The only drawback is the extensive paperwork that you have to do. For that, you might need to consult a real estate attorney to understand the terms and conditions properly before you buy the desired house.

* This article does not constitute legal advice and does not establish an attorney-client relationship.