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FHA Mortgage  

There are three main types of loans in the mortgage loan industry.  They are the conventional, VA, and FHA mortgages.  While all three are widely used for new loans or mortgage refinancing, let’s examine more closely the FHA mortgage.  People who have been looking for a bad credit mortgage have often been able to qualify for an FHA mortgage when they have been turned down for other types of loans.  This is because the credit requirements are not as strict as with conventional loans.  People with excellent credit can also qualify for FHA loans as well.  Let’s discuss some of the details of the FHA loan.   

Both borrowers and lenders like the fact that FHA loans are regulated and insured by the Federal Housing Administration, a US government agency.  This means that the lender has less risk if the borrower cannot make all the payments because the federal insurance will cover the loss.  With a conventional loan, the borrower is required to pay somewhere between 10% and 20% of the home's value as a down payment.  For the borrower, because of the insurance by the FHA, the down payment is only about 3.5% of the total value of the home they wish to purchase.  With the ability to put down a much smaller down payment, the house becomes more affordable. 

With the condition of the economy, many Americans have very little in savings to meet the high down payment requirements for conventional loans.  The FHA mortgage helps in this regard.  Even for a bad credit mortgage, your down payment is low and your interest rate should be competitive with the FHA loan.   

With an FHA loan, there are specific guidelines that must be followed.  As earlier mentioned, the credit requirements are somewhat less stringent than the requirements with other types of mortgage loans.  If you are thinking of mortgage refinancing and you currently have an FHA loan, your current lender may be able to streamline your mortgage refinance.  The lender already has all your information and therefore the paperwork is much less.  They simply refinance your current mortgage with a new rate.  This makes the process much simpler and quicker.   

With the lower credit score requirements, the lower down payments that are required, and the standardized specifications for an FHA loan, this type of loan simply is the best choice for many people.   With interest rates hovering quite low, the rates for these loans are very competitive and you can get terms of 15, 20, and even 30 years.   

If you can meet the basic qualifications of income, employment and down payment, you may want to think about getting an FHA mortgage loan while the rates are at record lows.