FHA Mortgage

Technically speaking , the FHA does not give mortgage loans. The term FHA mortgage would refer to mortgages offered by lending firms that have been subsidized by the FHA, thus the term FHA mortgage. This started during the “Great Depression” experienced by the US. Since there were a lot of people who can’t afford to pay their home loans at that time, the government decided to create the FHA or Federal Housing Administration. This agency aims to provide very low cost mortgage loans by giving sufficient “insurance” to private lenders. If the lenders are assured that they won’t lose any of their investments on you because they are backed by government insurance, then they can afford to lower their rates for your benefit.

It was originally intended by the government to self supporting by the premiums paid by the borrowers. As time passed by, FHA now helps people to obtain a mortgage who could otherwise not have qualified for it without government subsidy.

If you want to take out a loan subsidized by the FHA, ask lenders first if they originate FHA loans. Even with the FHA though, you still have to contend with different rates and terms because every lender still has the right to impose their own rules. You as a buyer still have to go through credit checks and background investigations by the lender. Your loan amount is also
considered and your past credit history is also taken into account for the lender to decide exactly what kind of terms and conditions they should set on your FHA mortgage loan.

FHA mortgage also covers hybrid ARM’s or adjustable rate mortgages. This allows prospective homeowners to take advantage of the low initial interest rate of these types of loans. The FHA then gets to decide how much of an increase it takes based on the market indices.
Aside from the insurance provided by the FHA to mortgage lenders, there are also other loan assistance programs of the US government that aims to provide very affordable housing loans to first-time home buyers and those that belong to the low-income bracket.

These programs such as “American Dream Down Payment Initiative” were later branded by the IRS as a sort of scam because all they ever do is to recycle the money that was supposedly lent by the seller themselves because the amount of the loan is already factored in the price of the home that poor unsuspecting home buyers avail of. This is why their label as FHA funded programs is very misleading. They might have been funded by the FHA but still there is no real benefit to be gained from the part of the buyer because their set-up is cyclical by nature. All they ever looked good upon is the first impression of being affordable and a generous blessing by the government to unwary consumers.

Lately, the US government is expected to put a stop to these misleading marketing activities by the year 2006. Unfortunately, the IRS is still unable to completely eliminate these devious mortgage firms. Nevertheless, the public would do well to be wary of the offer made to them by every business firm that they encounter. Not everything is a scam but it pays to be cautious in major financial decisions such as these.