Personal Business and Finance

Getting an FHA mortgage loan for your home purchase is not a loan at all. The FHA role in the home ownership quest is to qualify you for a certain amount of money based on your present income, expenses and credit history. Since they are more lenient than the banks or mortgage companies you have a better chance of being approved by the FHA.

This approval turns into FHA Mortgage Insurance which is then presented to potential lenders. These are lenders who may not have even taken your application without the FHA approval. But since the FHA is saying to the lender that they will insure the repayment of the loan, you now look like a good credit risk to them.

In addition to being approved and insured by the FHA, you are also entitled to a lower interest rates than you would have been offered directly from the lending institutions, if at all. The real up front savings is that when you shop for a home the FHA financing package limits the needed down payment to 3% instead of the up to 20% normally required from the average homebuyer with a normal credit history.

And if you credit is not top notch at the time you apply, the FHA insured loans interest rate might be higher for you, but at least you are still in the running. Conventional bank lenders will not even consider you without a minimum credit score of their liking.

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