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Heard of an FHA loan, but aren’t sure exactly what one is, how it’s different from a conventional loan or if it’s right for you? Maybe we can help.
So what is the FHA? The FHA, or Federal Housing Administration, is a group that manages the government home loan insurance program. The FHA insures loans granted to home buyers who might not otherwise qualify for a loan and assumes the risks associated with the loan for the lender.
FHA loans are a great option for first-time home buyers, mainly because an FHA loan is easier to get than a conventional loan. There are several reasons for this:
1.   Your credit score doesn’t have to be as high with an FHA loan, so it’s easier to qualify.
2.   Your required down payment will be less with an FHA loan.
3.   You can use money given to you by a family member, a government agency, or a non-profit organization for your down payment on an FHA loan.
A disadvantage to getting an FHA loan is that the loan limits with FHA loans are usually lower than with conventional loans. However, under the American Recovery and Reinvestment Act, FHA home loan limits will be raised to $271,050 for single family units in low-cost areas and to $729,750 for single family units in high-cost areas for credits issued from January 1, 2010 until December 31, 2010. Loan limits differ by state, so check the loan limits for your state on the FHA.com.
Another thing to keep in mind is that with an FHA loan, you’ll have to pay for mortgage insurance, which is approximately 1.75% of the loan amount of a 30-year loan. You can, however, wrap this into your mortgage payments, and the interest you pay on the mortgage for your primary residence is tax deductible.
For many home buyers, the benefits of an FHA loan definitely outweigh any disadvantages. And even though FHA loans are great for first-time home buyers, they aren’t the only ones who can benefit from an FHA loan. As long as you meet the loan requirements, you can qualify for an FHA loan, whether you’re buying a home for the first time or the fourth time and whether you’re purchasing or refinancing a home.
So how does an FHA loan apply to REO homes? With the FHA’s Section 203(k) loan program, home buyers can finance a home and the costs to renovate the home in one loan, the amount of which is based on the projected value of the home once the renovation is done. This is perfect for homes that may be in need of repair, as REO homes often are.
The FHA is part of the Department of Housing and Urban Development (HUD). You can find out more about qualifying for an FHA loan, what documents you’ll need to provide your lender, loan limits in your area, and more specific information about financing an REO home with an FHA loan when you visit the HUD website.
To get the best deals on REO homes for sale, try online bidding â the new, easy way for anyone to find an purchase REO properties across the country.