An FAQ for FHA

 Common questions about the Federal Housing Administration

The Federal Housing Administration (FHA) has been providing mortgage insurance for home loans since 1934, and today it’s the largest insurer of mortgages in the world. But despite its size and relative prominence in the U.S. market, most folks don’t seem to know much about the agency
and what role it may play in helping them with their mortgages.

Does it matter? Absolutely, especially given the pace of change in today’s housing markets and some recent modifications in FHA policies and mortgage rates that could have profound effects. These changes inspire a lot of questions, some of which we’re happy to help answer.

Are FHA loans just for first-time buyers?

Absolutely not! Strictly speaking, FHA loans are available to anyone looking to purchase or refinance a home. Today, the FHA plays a major role in backing financing for all types of potential home buyers, including minorities, first-time buyers, and buyers with troubled credit.

Can you get any type of home with an FHA loan?

Not quite, and some recent changes mean some properties may no longer be financed with an FHA-backed loan. As of October 1, 2011, the maximum limit for loans insured by the FHA has been reduced in most counties — in some cases, pretty drastically (see the FHA website for details on your county). A non-FHA loan typically comes with much-higher down payments, so it pays to know the limits.

Do FHA loans have higher rates?

Not necessarily, though it depends on a lot of factors. In fact, if you’ve been reading our blog, you may have noted we’ve been talking a while about mortgage rates rising—and it appears we may have been hasty in our projections. As of this writing, FHA loans with fixed rates are coming in at an amazing 3.75 percent.

Does my current loan have to be FHA insured to be refinanced through the FHA?

Not at all—all conventional mortgages are eligible to be refinanced with an FHA loan. And considering that down payments for FHA loans are as low as 3 percent—and 100 percent of closing costs can be a gift—it makes sense to consider an FHA loan for refinancing.

Tagged in : Mortgages