The Federal Housing Administration (FHA) was created out of the National Housing Act of 1934, and was established to increase home ownership and provide affordable housing opportunities for all Americans coming out of the Great Depression. While most people believe that the FHA lends money directly to borrowers, it actually just insures the mortgage financed by FHA-approved lenders.

Why Are FHA Loans So Great?

FHA loans are by far the easiest mortgage loans to qualify for due to the flexible credit guidelines and the low down payment requirements. A borrower who cannot afford a traditional down payment of 20% or has gone through a financial hardship like a short sale, foreclosure or bankruptcy can benefit the most from the FHA program.

What Are the Advantages of FHA Loans?

• 3.5% down payment
• Credit scores down to 600
• No prepayment penalty ever
• An FHA loan may also be assumable
• Up to 50% debt to income ratio
• Allows for 6% seller paid closing costs
• Easy to use gifts for down payment and closing costs
• Allows for non-occupying co-borrowers to help qualify

What Are the Waiting Periods After a Hardship?

• 3 Years from Foreclosure or Short Sale
• 2 Years from Discharge of Chapter 7 Bankruptcy
• 1 Year from Discharge of Chapter 13 Bankruptcy

What Are Some Popular FHA Programs?

• Standard FHA Purchase
• Most popular FHA program for home purchase
• Fixed and ARM rates available
• 1-4 unit properties eligible
• 3.5% down payment

HUD REO $100 Down Program

• Most popular HUD foreclosure program
• No appraisal needed
• Allows for repairs up to $5K
• $100 down payment

FHA Streamline Refinance

• Most popular FHA refinance program
• No appraisal required
• No income verification
• Reduced documentation

FHA Cashout Refinance

• Debt consolidation OK
• Cashout up to 85% LTV
• Debt to income ratio to 50%
• Fixed and ARM rates available

Be sure to take a close look at FHA and their programs to find out which one is right for you.