Updated: 04 August 2014 04:47 PM
The Federal Housing Administration’s mortgage loans have been a preferred option for first-time buyers. The small down payments and closing costs have made the loans popular for almost 80 years.
Additionally, FHA loans are easy to understand because they apply to particular types of borrowers. They are designed to help first-time home buyers, seniors or people looking to fix up a home. Approved FHA lenders also enjoy these mortgage loans because the FHA guarantees repayment.
But for the past three years, popularity has waned a bit for the mortgages since FHA insurance premiums have increased. In June 2013, the government made changes in an effort to reduce the liability of FHA-backed mortgages that make this premium a
permanent fixture for the life of the loan.
These new insurance premiums have made the effective FHA mortgage rate much higher than those offered by conventional loans. In many cases, conventional mortgage loans are actually better options solely based on this increased premium. Many traditional lenders have taken advantage of this recent development by offering either single-payment or higher interest rate options to pull in business previously catered to by FHA loans.
Overall, an FHA mortgage loan can be a great tool for the right family to realize home ownership. With down payment requirements around 3 percent and closing costs unmatched by any other type of mortgage, you can easily see why it has become the most popular lending option for young families across the country.