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What is an FHA Loan? FHA loans grow more popular with every passing year for first-time homebuyers because of their ease of qualification and their low down payment requirement. In 1997, for example, 76 percent of FHA loans originated were first-time homebuyers, compared to 72.7 percent in1996, and 68.3 percent in 1995. A minimum 3% down-payment, as well as leniency regarding bankruptcy and credit blemishes makes them attractive, but by no means restricts them to first-time homebuyers. FHA loans are available as the first loan, or the hundredth, as long as you have only one FHA mortgage at a time. The Federal Housing Administration (FHA), a corporation wholly owned by the United States Government, was established under the National Housing Act of 1934 to improve housing standards and conditions. Its goal was to get more Americans in homes by making home ownership much easier and more affordable by insuring lenders’ mortgages. FHA, which is administered by HUD (Department of Housing and Urban Development), does not lend the money to borrowers directly. Rather, they insure the mortgages that lenders extend to borrowers who qualify for FHA loans. Additionally, FHA monitors loans originated from FHA approved lenders for equal opportunity, fraud, and default rate. The "mortgage insurance premium" collected from the borrower on each loan helps to cover the cost of the risks associated with this program. |