FHA stands for Federal Housing Authority. This is a federally subsidized lending program. It was originated in the 1930's by the government to assist perople in financing homes. Prior to that time, people could only buy in cash or on private contract and most didn't own their own homes.
FHA loans (and VA loans), until about 10 years ago, were about the only low down payment programs. FHA loans are, in many cases, a bit easier to qualify for than conventional loans. They have only an approximate 3% down payment requirement and the seller is required to pay some of the buyer's closing costs that they are not required to pay on conventional loans.
FHA loans are insured by the government against borrower payment default and the borrower pays for that insurance by financing, as a part of their loan, the FHA mortgage insurance premium. This mortgage insurance premium is lower than that on conventional loans. In addition, the borrower pays a monthly insurance renewal as a part of their payment. This renewal payment is also less than that on conventional loans. When the borrower sells the home, they are entitled to and will receive a form to claim a refund of any unsued portion of the financed mortgage insurance premium.
FHA loans also allow the borrower to qualify using the income of a non occupying co-borrower like their parents. Most conventional loans have certain restrictions on that assistance.
Since you are pre-approved, all you need to do now is find a home you want that can be purchased for the amount you are qualified to borrow.
Happy hunting. I hope you find the home of your dreams.
20 years in mortgage lending
· 1 decade ago