FHA Loans


FHA stands for Federal Housing Administration. FHA loans are insured by the Department of Housing and Urban Development (HUD). When a loan is insured by HUD, it protects the lender from incurring damages due to an FHA loan defaulting.

The National Housing Act was signed by President Franklin D Roosevelt on June 27th, 1934. The Federal Housing Administration (FHA) was created by the Act. The (FHA) was created to help the housing Industry recover from the Great Depression. Originally, FHA was not intended to fund loans but to provide mortgage insurance to banks to protect banks against losses incurred by home loans. As a result, FHA allowed lenders to commit more funds to home mortgage loans. Today, FHA is the largest insurer of mortgages in the world.

FHA home loans are generally easier to obtain as their underwriting guidelines are more lenient than Conventional guidelines. To originate FHA loans, a lender must be approved through FHA.

Underwriters or Lenders use FHA's "four C's of underwriting" when evaluating FHA applications:

  • Credit History of the borrower

  • Capacity to repay the loan

  • Cash assets available to close the mortgage

  • Collateral, which evaluates the value of the home


Some General information about FHA Loans: