FHA Made Simple – Boston Mortgage Update

The popularity of the government backed mortgage programs (notably FHA loans) continues to increase every year. If you are planning on applying for a mortgage loan in Boston, you’ll have noticed that FHA mortgage loans have superior stats compared to standard home loans: in terms of the interest rate which is charged, the down payment which is required, and the ease of acceptance of the loan. To understand why FHA backed loans offer such advantages, a trip down FHA loan memory lane is required.

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History of the FHA

Established in 1943, the Federal Housing Administration’s sole purpose was to improve and increase the ownership opportunities, as well as housing conditions for all Americans. Since its establishment, it has helped to fund the purchase of millions of homes around the country, and has set up a separate program to construct millions of apartments for Americans from the lower income group, especially the elderly. It has also played a major role in helping the housing of the armed forces of the country, i.e. veterans.

Advantages Of an FHA Mortgage Loan

By applying for a FHA mortgage loan, you can avail yourself the following benefits:

  1. Low Interest Rate: Since the federal government insures the loan, the lender will offer you extremely competitive interest rates. So you will save a lot of money in the long run.
  2. Small Down Payment: Such mortgage loans usually have a very small -e.g. 3.5% – down payment; this money can be from different sources such as an employer or charity organisation or a family member in the form of a gift.
  3. Ease of Qualification: Due to the reduced risk, the lender will offer the loan with terms which allow you to qualify easily.
  4. Higher Chance of Acceptance with Low Credit Scores: Unlike normal loans where you require an excellent credit score to qualify for low rates, you can qualify for FHA loans even with a less than perfect credit score.
  5. Foreclosure Avoidance: Since its purpose is to help people buy a home, in case of hard times after purchasing the home, there are options available to you to prevent a foreclosure.

How the FHA Works – The Reason Behind the Advantages of the Loan

The FHA does not directly provide the funds for a mortgage loan. What it does is provide lenders with insurance for a specific mortgage loan. This insurance (in case of a default of payment from the borrower) will protect the lender from losses -effectively reducing the risk involved in the transaction. The lender simply has to stick to certain established guidelines while putting together the loan for it to be qualified for FHA status. Because of this lowered risk, lenders will approve applications for a mortgage loan even if the credit scores of the applicant are low, and offer loans with a lower initial downpayment. Additionally the FHA is completely self-funded; its main source of funding is the insurance premium which is receives from each mortgage loan it assures. Thus your tax dollars are not even used!

The FHA has done its job consistently for over 75 years, now that you know why the advantages are offered and what the advantages are, you can consider applying for a FHA mortgage loan when you think of buying a home for yourself. Talk to your lender to see if you qualify.

Lender Tip: We offer FHA backed mortgage loans in Greater Boston and surrounding areas, contact us for more details.

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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