An FHA (Federal Housing Administration) mortgage is insured by HUD (Housing and Urban Development Agency). These loans offer borrowers a way to purchase a home with a smaller down payment. FHA mortgages are intended for the first-time homeowner whose credit is not as perfect as a conventional mortgage.
Guidelines and Parameters
FHA Mortgages are backed by the federal government and put into action by HUD. These loans were established to allow a broader range of credit worthy borrowers to participate in becoming home owners. They allowed for expanded guidelines from conventional mortgages that did not require as much money down. These loans all have PMI (Private Mortgage Insurance) and an Up Front Fee as part of the cost to get one of these mortgages. They are intended for the first-time buyer or the occupying home owner.
30-year fixed rate
This is the most common mortgage that homebuyers compare rates to. The rate is good for 360 months (30 years) and is amortized over that time period to payoff.
20-year fixed rate
This rate is based on 240 months and as the term decreases to pay back, the payment owed increases.
15-year fixed rate
This mortgage will be due in full in 180 months. It will have an even higher payment than the 20-year term.