An FHA loan is a home loan guaranteed by the U.S. Federal Housing Administration (FHA). Lenders and investors, like banks and credit unions, Mortgage Lenders, Mortgage Broker Companies, issue the loans, and the FHA insures and guaranties them. If for some reason you cannot repay your loan, the Federal Housing Administration will pay the lender instead.

Created in 1934 during the Great Depression, the FHA is a government agency that provides mortgage insurance to lenders. Before the creation of FHA only four out of ten households owned homes, and loans had extremely difficult to meet requirements. For example, borrowers could only finance up to 50% of a home’s purchase price (compared to 96.5% today), and loans typically required to be paid in full after three to five years.

FHA is the largest insurer of mortgage loans in the United States, with over 47.5 million loans insured over its lifetime. Currently it insures over 8 million single-family homes and over 14,000 multifamily properties. The program has helped to increase the homeownership rates in the U.S. to around 7 out of 10 households owning a home today.

FHA loans are an excellent alternative for borrowers that do not qualify for conventional loans.

• Your payment won’t change through the life of the loan.
• Great for those planning on staying in their homes for at least 5-10 years.
• Rate and payment security.
• Stability makes budgeting easier.

• ARMs payments are usually lower than a 30-year fixed rate.
• Can reduce your monthly payment significantly.
• Usually the lowest rates available.
• Caps on Arms offer extra protection.