In 1965 the Department of Housing and Urban Development (HUD) was formed.  Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance program. This program allows a first time home buyer (or buyer that does not currently have an FHA loan and is looking to purchase a primary residence) who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender.

The most popular FHA home loan program for a first time home buyer is by far is the 203(b).  This is your standard fixed rate loan for 1-4 family owner occupied houses and only requires a minimum of 3.5% from the borrower.  This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization, or government agency.

The main advantage to a FHA home loan is that the credit criteria for a first time borrower are not as strict as Conventional Loans sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC). Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing. Also, in some cases FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan. In addition, the seller or lender can pay for part of the "traditional" closing costs while a portion of a borrower's closing costs can partially be wrapped into the loan. Also, the monthly mortgage insurance premium is cheaper for an FHA loan verses a conventional loan with 3% down. 

Many people make the mistake and assume that FHA loans are only available for first time home buyers.  This is not true.  FHA loans are available to anyone, whether your first or fifth home and can be used to purchase a home or refinance a home.  If you are refinancing a home the current loa does not have to be an FHA loan.

 The greatest disadvantage of FHA home loans is that FHA limits the loan size that a borrower can borrower in which that is not much of a disadvantage with the current FHA loan limits being increased. The only other disadvantage is  the FHA upfront mortgage insurance premium(MIP) however this amount makes just a very small increase in the borrower's monthly payment and a portion of the UFMIP(upfront mortgage insurance premium) is refundable is certain cases.  Don't miss out on the low rates and the credit flexibility that FHA loans offer, apply now and find out what you qualify for today by clicking the link below!