FHA Home Loan & VA Home Loan

An FHA (Federal Housing Administration) home loan may be issued only by federally approved lenders to borrowers who meet certain stringent requirements.  FHA loans came about during the Great Depression in order to provide mortgage lenders a form of insurance on their home loan portfolios.  While some FHA programs are subsidized by the government, the goal is for them to be self-supporting through the receipt of mortgage insurance premiums.

The Federal Housing Administration (FHA) does not make home loans directly, but rather they insure loans made by other FHA approved mortgage lenders.  The maximum home loan amount differs by region and can be found at the U.S. Department of Housing and Urban Development.

FHA home loans are designed to benefit lower income families who might not otherwise be able to afford a home.  FHA home loan interest rates are generally lower than non-FHA qualified loans due to the Federal Housing Administration insuring the debt.  FHA loan programs also allow for a lower down payment (as little as 3% of the purchase price), which is the main benefit to lower income families who can afford the monthly mortgage payment but haven’t saved up the down payment.

A VA home loan is guaranteed by the U.S. Department of Veterans Affairs and issued only by federally approved lenders.  A VA home loan is very similar in principle to an FHA home loan; however the primary goal with VA home loans is to help our veterans and surviving spouses purchase a home which they might not otherwise be able to with other mortgage financing options.

The major benefit of a VA home loan is that there is no down payment requirement and a lower interest rate for qualified borrowers.

FHA home loans are making a comeback in the very recent past as the economic downturn and housing crisis has hurt the mortgage financing & home loan industry.  If you can qualify for either an FHA or VA home loan, you can likely expect a lower interest rate and a lower down payment.