FHA mortgages
The Federal Housing Administration is a government agency that works in conjunction with The Department of Housing and Urban Development to offer mortgages to people and families. The goal of FHA mortgage loans is to allow people, who otherwise may not qualify for a loan with a traditional lender, purchase a home.
Some important facts about FHA mortgage loans include:
- You no not need a down payment. The FHA allows you to use gift funds for a down payment, so if you go through an organization like Ameridream that offers free down payment assistance you can purchase a home without having to wait the many years it could take to save for a down payment.
- The FHA does not directly loan you the money to purchase your home. If you are approved for an FHA mortgage loan then this means that the lender who finances your loan has a guarantee from the FHA that if for any reason you fail to meet the terms of your mortgage agreement, the FHA will repay the guaranteed portion of your mortgage. For instance, if you borrow a $100,000 to purchase a home and the FHA guarantees 25% of the mortgage loan, and at some point can not make the payments, then the FHA will pay back the lender $25,000. The guarantee from the FHA makes it easier for you to qualify for a loan because the lender is guaranteed to be repaid a portion of the loan, whereas with a traditional loan the only guarantee is the home itself.
- You can only use an FHA approved lender. The FHA has a list for their approved lenders in every state, and in order to get an FHA loan you must use one of the lenders on their list.
- You can finance home improvements into your FHA mortgage loan. The FHA allows a certain amount of your loan to be used to repair or improve the home you are purchasing as long as it is in the contract and you make the improvements in a timely manner.
- You save money with an FHA mortgage loan. Because the FHA wants to help people become homeowners they want to keep the loan costs down so that you can afford to purchase a home. Therefore, there are limits to how much certain fees can be and the commissions and costs also have maximum amounts. Once you find an FHA approved lender you should ask about the costs and fees associated with a mortgage loan.
- The FHA will be there for you if you have a problem with making your mortgage loan payment. Most traditional lenders want their payment on time and do not consider extenuating circumstances. The FHA understands that sometimes loss of employment or illness can cause a missed mortgage payment, and they will work with you and the lender to find a repayment solution so that you can keep your home.
- Even if you have problems with your credit history you can still get an FHA loan. You do not need perfect credit to get a mortgage loan through the FHA. Even if you have declared bankruptcy, as long as it has been discharged for two years you may still qualify for a loan to purchase a home through the FHA.
For more information on getting an FHA mortgage loan, or to look for an FHA approved lender near you click here.
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