FHA Mortgage Refinance Loans — Texas Loan

Fha Mortgage Loans Taking Off

FHA mortgage loans were created in 1965 with the goal of promoting home ownership in America. FHA stands for Federal Housing Administration. FHA loans are administered through this department which is part of the Department of Housing and Urban Development (HUD). Even since this program’s inception millions of Americans have realized the dream of home ownership through it.

There are many private mortgage lenders and always have been. Traditionally, lending standards were very strict. For a brief period of time they relaxed greatly, however they are quickly swinging back to what they were historically. Borrowers are no longer able to get “no money down” mortgages. Credit standards have tightened once again.

The impact of these requirements is to effectively shut out many just starting life from the mortgage marketplace. Obviously, if you are unable to attain a mortgage this makes home ownership nearly impossible. FHA loans are meant to make mortgages obtainable for those who otherwise would be left out of the process.

Most private lenders now require a twenty percent down payment. FHA loans, however, only require a 3% down payment in most instances. This is obviously a dramatic difference. It often translates to tens of thousands dollars less needed for a family just starting off in life to own their own home. It further serves to support the entry level price points of the realty marketplace.

Most all private mortgages entail “points” or other closing costs. This further adds to the amount that must come out of the borrower’s pocket at closing. Many potential buyers can not afford these additional costs. FHA loans seek to solve this problem.

FHA loans have the lender absorb half of these costs most usually and the remaining half is attached to the loan and paid over a long period of time. This saves the borrower thousands of dollars in out of pocket cash. That makes closing feasible for many who otherwise would not have funds to finalize the transaction.

Another area which precludes many potential home buyers from getting a mortgage is a bad credit score. Lenders today have greatly tightened lending standards. Many with no established credit are therefore shut out for this reason. FHA loans seek to address this. There are much lower credit standards for an FHA loan.

FHA mortgage loans allow many to own homes who otherwise wouldn’t be able to. Although not a direct lender, FHA enables the lending sector to make loans they otherwise would not be inclined to write. This opens up home ownership to many deserving Americans.

By: Adam Hefner

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