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What is an FHA mortgage?

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Quick Answer

An FHA mortgage loan is a loan guaranteed through FHA lenders by the Federal Housing Administration. Qualifying buyers obtain FHA loans to purchase single and multi-family homes in the United States. The loans are generally lower in interest than traditional bank-held loans, making them popular among home buyers, and are subject to FHA's predetermined loan limits for each particular area of the country, according to the FHA.

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Full Answer

FHA mortgage applicants must be creditworthy with at least two lines of credit. Borrowers with poor credit history are generally not approved for an FHA loan. FHA considers borrowers who have bankruptcies in their credit histories, provided 2 years has lapsed since filing Chapter 7 bankruptcy or the borrower is paying on a Chapter 13 bankruptcy as agreed. Although there are exceptions, the FHA generally does not make loans to previously foreclosed homeowners, notes the FHA.

To apply for an FHA loan, the borrower goes through a bank or other lending institution approved by the FHA. The borrower must provide proof of income, tax information and other information to apply.

Although several FHA loans are available, one of the most widely used is the 203(b) FHA fixed-rate mortgage loan program. This program requires a 3 percent down payment from the borrower and finances the remaining 97 percent at a very competitive rate.

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