FHA Question: What is an FHA mortgage?

FHA Answer: A FHA mortgage is a form of insurance. The FHA does not lend money; private lending organizations, such as banks, credit unions, or savings and loans, lend money. An FHA approved mortgage is insured to the lender in case the homebuyer defaults on the loan.

FHA Question: What are the advantages of an FHA mortgage?

FHA Answer: There are many advantages of a FHA mortgage. Typically, only a 3 percent down payment is required to secure a FHA mortgage. Unlike conventional mortgages, the money for down payment does not have to be verified as the buyer's money, it can be a gift to the home purchaser from outside sources. In addition, the credit qualifications for a FHA mortgage are often less stringent than qualifications for conventional mortgages. Bankruptcy or foreclosure does not necessarily disqualify a borrower from approval if the processes have been completed within the required time period.

FHA Question: Are FHA mortgage processes complicated?

FHA Answer: No more so than conventional mortgage processes. FHA financing procedures have slimmed down in the past 20 years. In some cases, it is easier to qualify for a FHA mortgage than it is for a conventional mortgage.

FHA Question: Who is eligible for a FHA mortgage?

FHA Answer: Anyone who meets the credit, income, and employment requirements is eligible for a FHA mortgage. U.S. citizenship is not required for a FHA mortgage. The property secured with the mortgage must be the purchaser's primary residence. A social security card is necessary to qualify for a FHA mortgage.

FHA Question: What is mortgage insurance, and how does it apply to FHA mortgages?

FHA Answer: Mortgage insurance is required to secure a FHA mortgage. Insurance money is collected by the lender (the bank, credit union, or savings and mortgage) and paid to the FHA. If a buyer defaults on the mortgage, the money will be returned to the lender in the form of insurance against the default. Mortgage insurance costs are typically 1 percent of the total mortgage. Private mortgage insurance may be required until 20 percent of the equity in the home has been paid.

FHA Question: What are the different types of FHA mortgages?

FHA Answer: Like conventional mortgages, there are several different types of FHA mortgages. A fixed rate mortgage secures an interest rate at the time of purchase and remains constant for the life of the mortgage. There is also an adjustable-rate mortgage (ARM). The interest rate on an ARM fluctuates throughout the life of the mortgage, mirroring the current national index. There is also a graduated payment mortgage (GPM), which requires a down payment and has negative amortization.

FHA Question: What are the interest rates on FHA mortgages?

FHA Answer: FHA mortgage interest rates are on par with the national average for conventional mortgages. FHA mortgage interest rates reflect current market conditions. A buyer may also use points when securing a FHA mortgage. "Points" lower the interest rate, and must be used as a down payment or financed through the mortgage.

FHA Question: What are the expenses of a FHA mortgage?

FHA Answer: When purchasing a house with a FHA mortgage the buyer is responsible for the following: Down payment (usually no more than 3 percent), appraisal fee, escrow, mortgage origination fee (typically 1 percent of base mortgage amount), recording fees, credit report charges, title insurance policy fees, MMI impounds, hazard insurance and reserves, MIP (mortgage insurance, which can be financed), and property taxes.