What is an FHA loan?

The Federal Housing Administration (FHA) guarantees loans that meet certain requirements. Collectively, these are referred to as FHA loans. The FHA provides this guarantee to lenders to encourage them to make loans to borrowers with poor credit and lower down payments, which provides access to homeownership to buyers who might not otherwise qualify for a loan.

What are the requirements to get an FHA loan?

  • Only some lenders can issue these loans – lenders must be pre-approved to make a loan that the FHA will guarantee. We can help you find an approved lender.
  • Only some properties can be purchased with these loans – the FHA publishes lists of properties that are already approved – we can help you find an approved property. Otherwise, if the property you want hasn’t been approved yet, we can ask FHA to review and approve it – however, approval is not guaranteed.
  • Only some appraisers can appraise the property – once you are in escrow, an FHA-approved appraiser must appraise the property and evaluate whether or not it meets FHA guidelines. If the appraiser determines that repairs must be made, and the seller refuses to perform or pay for those repairs, you will have to come up with the money for the repairs by closing, or else cancel your purchase of the property. If this situation isn’t handled properly, you could lose your earnest money and the property.
  • Only some borrowers can qualify – while the down payment and credit requirements for FHA loans are low compared to most other loan types, the FHA imposes other requirements to ensure that the borrower will be able to make their payments. Employment history, past bankruptcies, foreclosures, federal student loan delinquencies and unpaid income taxes can all affect the borrower’s ability to qualify for this kind of loan.
  • Only owner-occupants can apply – FHA loans are intended to help families achieve homeownership. These loans will usually only be issued when the borrower intends to use the property as their principle residence.

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