FHA Loans

A Federal Housing Administration (FHA) loan is a home mortgage that is insured by HUD and issued by a bank or other lender that is approved by the agency.  The down payment requirement for FHA loans is only 3.5% of the purchase price. FHA loans also have much shorter waiting periods for anyone with past credit issues when compared to conventional loans. For example: A borrower can obtain an FHA 2 years after the discharge date of their bankruptcy compared to the 4-year requirement for conventional loans. Borrowers with a previous foreclosure can obtain a FHA loan 4 years after their foreclosure date unlike conventional loans which have a 7 year waiting period. Congress created the FHA in 1934 during the Great Depression. At that time, the housing industry was in trouble. At that time, default and foreclosure rates had skyrocketed, 50% down payments were commonly required, and the mortgage terms were impossible for ordinary wage earners to meet. As a result, the U.S. was primarily a nation of renters, and only one in 10 households owned their homes.  The FHA was created to change this dynamic in the US.