The benefits of FHA Home Mortgage Loans

By:    Updated: December 19,2016

If you are in the market for your first home or you want to buy a home but have a less than stellar financial profile, you should look into getting an FHA insured mortgage loan. FHA mortgages are easier to get than traditional mortgages. They can also save you thousands of dollars over the life of your mortgage.

What Are FHA Home Mortgage Loans?

FHA mortgage loans are mortgages that are insured by the federal government of the United States. The purpose of the FHA loan program is to help first time homebuyers and those individuals who might have trouble securing a traditional home loan get mortgage financing.

How Does The FHA Program Work?

The first thing to note is that FHA mortgages are not available directly from the federal government. Therefore, the federal government does not provide you with direct financing, it is not in control of the interest rate you will pay on your mortgage and it has no say in the loan approval process. Instead, private mortgage lenders have the option to issue FHA insured mortgages and set the mortgage rate. Because these mortgages are insured by the federal government, many private lenders offer them because of the additional level of protection.

The Benefits Of FHA Mortgages

More Lenient Approval Process: If you default on an FHA mortgage, the federal government is on the hook to pay your mortgage lender for your missed mortgage payments. As a result of this added level of protection, FHA mortgages are easier to get than traditional mortgages. This makes FHA mortgages a perfect option for first time homebuyers with limited credit history and liquidity. It also makes FHA mortgages a good option for those with less than perfect credit profiles. It is important to note that the individual private lenders have stringent requirements that must be met in order to qualify for an FHA loan. Additionally, even if you meet these requirements, you might not be able to find a private lender willing to give you a loan. You can find a list of FHA approved lenders in your area by going to


Reduced Down Payment: Another great advantage of FHA loans is that they allow the homebuyer to pay a smaller down payment than traditional mortgage loans. Specifically, the FHA program allows for a down payment as low as 3.5% of the total purchase price. This helps gets homebuyers into their house faster because they do not have to spend a significant amount of time saving for a large down payment. Additionally, the FHA program allows you to receive your down payment as a gift from family, friends or a benefactor. Traditional loan programs generally do not allow this. Furthermore, you can even receive direct assistance from the FHA through down payment assistance grants.


Reduced Closing Costs: Because the goal of the program is to help get people into houses, FHA mortgages tend to have lower closing costs than typical mortgage loans. However, since different lenders will charge different closing costs, it is important that you shop around to find a lender that offers the lowest closing costs.


Lower Interest Rates: Interest rates on FHA loans tend to be lower than or on par with those of traditional mortgage loans. This is because private lenders are comfortable offering homebuyers lower that average interest rates because the insurance from the federal government helps to reduce their risk. However, it is important to note that different FHA approved lenders will offer different interest rates. Therefore, you need to shop around in order to get the best deal on your loan.

Help With Financial Distress

If you have an FHA mortgage and you run into financial trouble, and experience difficulty making your mortgage payments, the FHA will work with you to alleviate your financial distress. There are multiple FHA programs designed to keep homebuyers in their home and avoid foreclosure. Additionally, if you have a traditional mortgage, you may be able to refinance it into an FHA mortgage. If you qualify, you might be able to take advantage of a lower interest rate, which can reduce your monthly mortgage payment. You can also use FHA refinancing to change your interest rate from adjustable to fixed which will help make your monthly mortgage costs more predictable.


When you are in the market to purchase a home, it is important that you identify and properly evaluate all of your financing options. Because the FHA loan program is one of the best options for many prospective homebuyers, you should take the time to fully investigate this option. It could end up saving you thousands of dollars on your home purchase.

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