What Makes FHA Loans Different?

How Mortgages Backed By The Federal Housing Administration Are Different

When you first begin to learn about the different home loans options that are available, the jargon can be confusing. There are a plethora of different types of loans and they can all seem to be backed by different parties. To help you understand one type of loan, here is a simple guide to what sets a loan backed by the Federal Housing Administration (FHA) apart.

  1. Mortgage Insurance: FHA loans are different from many home loans in that the Federal Housing Administration requires that borrowers who secure these loans also take out mortgage insurance. This protects lenders from being left in the lurch if someone fails to make mortgage payments.
  2. Easier Credit Requirements: Because of the protection that mortgage insurance offers, lenders are more likely to offer FHA-backed loans over other loan options to potential borrowers with weak credit scores.
  3. Repair Cash Available: For borrowers who need to make repairs on the homes they are hoping to buy, the FHA offers a loan product called a 203(k). This loan is taken out on the projected value of the home after if has been fixed up rather than its current value, and so enables borrowers to take out up to $35,000 for nonstructural repairs.
  4. Extra Grace Measures: Although these are not true in every case, for some borrowers who experience financial hardship the FHA may offer loan modification, longer loan terms, or an added grace period.

If you are looking for a guide to help you understand the mortgage market so you can secure the best home loan for your situation, contact the home loan experts at Avis Lending. With locations in Irvine, California and Lahaina, Hawaii, we are here to meet all of your West Coast mortgage needs. Do not hesitate to call us today!

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