The FHA (Federal Housing Administration) is a government agency that insures mortgages, giving mortgage lenders the ability to give mortgages to people who might not qualify for conventional mortgages. To make it easier to get approval and buy a home, the down payment requirements for an FHA home loan are considerably lower than a conventional mortgage.
You can get an FHA home loan for as little as 3.5% down payment. That means to purchase a $200,000 home, you would only need a $7,000 down payment. THis makes the FHA home loan a great option for most first-time home buyers.
No. Since the Federal Housing Administration does not make loans directly, they work through a wide variety of FHA approved lenders. This ensures that you can work with the FHA mortgage lender of your own choosing.
Mortgage insurance protects the lender against the possibility that a borrower defaults on the mortgage and is is completely different from homeowners insurance. Mortgage Insurance gives mortgage lenders the confidence to originate mortgages to people with less than ideal credit backgrounds. With an FHA home loan, the borrower can pay for the mortgage insurance with an upfront payment and a small addition to their monthly mortgages payments.
A bankruptcy does not disqualify an applicant from qualifying for an FHA home loan, if the applicant has established a responsible payment history since the bankruptcy. It may however, take two years after the discharge of a Chapter 7 bankruptcy, and one year after the payout period for a chapter 13 bankruptcy to qualify.