FHA loans, without a doubt, comprise one of the most widely used programs available. Because of their lower down payment and lower lending requirements, FHA loans are very popular with first-time homebuyers. Perhaps that’s why the FHA program is also one of the most misunderstood—many buyers think that FHA loans are only available to first-time homebuyers, but they are also a viable option for repeat buyers.
Three facts about FHA mortgage loans
- The FHA is not a loan. The Federal Housing Administration (FHA) provides mortgage insurance to lenders that make loans that meet FHA standards. The FHA reimburses lenders a portion of the losses if there’s a default on the loan.
- FHA loans are available to first-time homebuyers and repeat buyers. The confusion arises from the fact that there are indeed additional incentives associated with first-time homebuyers—for example, reduced mortgage insurance premiums.
- All FHA loans are not the same—lenders who offer limited programs with limited rates likely cause this misconception. FHA loans and rates vary greatly from one lender to the next.