Introduction to FHA loans:

FHA loans have helped lots of Americans to become homeowners who could not afford to do so with conventional loans. FHA or the Federal Housing Administration insures the loans offered by FHA approved lenders to borrowers on both new and existing single and multi-family housing. However, one of the most important facts here is that FHA does not offer any loan directly to anyone; it rather insures the loans offered by private lenders who are approved by FHA. The mortgage insurance by FHA reduces the risk to lenders in offering loans to borrowers significantly and enhances the borrowing power of individual borrowers.

Key features of FHA Loans:

Lenders charge a higher rate of interest if the loan offered has any associated risk. Similarly if there is lower risk involved in offering any loan, the same lender charges lower rate of interest because of the lower risk or enhanced security of loan. In the same way, the loans offered by FHA approved lenders are insured by FHA which reduces the risk for lenders in offering loans. Therefore, these lenders pass on certain benefits to borrowers, which may be one or more of the following:

• 1. Low down payments
• 2. Low closing costs
• 3. Easy FHA Loan Requirements

FHA Loan Requirements: The eligibility criteria

In order to meet FHA mortgage loan requirements, you should have:

1. A permanent source of income e.g. through full-time and regular employment, with at least last two years in the same organization/employment

2. Proof of paying bills

3. Any long-term and running loan e.g. auto loans etc

4. Sufficient amount to pay as down payment

5. Sufficient monthly income and savings to pay the monthly mortgage along with other costs, if any, timely and regularly.

6. Any foreclosure should be at least 3 years old

7. Any bankruptcy should be at least 3 years old.

However, the actual requirements for FHA loans may vary from borrower to borrower and lender to lender. The above given conditions are an overview of common eligibility requirements to obtain an FHA Loan.

How do I know if I can get a loan?

The best strategy to check whether you can get the loan or not is to use any simple mortgage calculator available on the websites of lenders and calculate the amount you can pay as down payment and subsequently meet your broker or any reputed lender. Also, you can get assistance from housing counseling agencies approved by FHA. These counselors would help you evaluate your potential for loans. In addition, another method is to go to a lender and apply for a mortgage before searching for a home. This way, lenders can tell you how much you need to spend from your own.

Therefore, finally to conclude, since FHA loans are insured by FHA, the approved lenders have no risk in offering loans to different borrowers. Moreover since, these lenders have no risk, they even have lesser requirements so that you can meet the FHA loan requirements. Therefore, today it is very simple and easy to qualify for FHA mortgages. Even people with bad credit or those having previous bankruptcy or foreclosures are also eligible for FHA loans. Infact, through FHA loans, people with bad credit get an opportunity to improve their credit record.

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