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The FHA is not funded by tax dollars, but from the revenue generated by FHA mortgage insurance. This cost is borne by the home buyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

What is FHA Mortgage Insurance?

FHA Common Question #15

FHA mortgages are insured to protect lenders in case of a default on the FHA loan. An FHA mortgage is advantageous to the borrower because of the reduced cash investment needed to close on a home. The FHA mortgage is possible in part because the FHA is funded solely from income it creates itself.

The FHA is not funded by tax dollars, but from the revenue generated by FHA mortgage insurance. This cost is borne by the home buyer, but the insurance cost ends approximately five years later, or when the FHA mortgage balance is seventy-eight percent of the property value, whichever occurs last. Other home loans have more stringent requirements, but FHA mortgages have flexible payment schedules and more inclusive definitions of monthly income.

All of this may be quite confusing to a first-time home buyer. If you aren't sure why an FHA loan may be right for you, ask your lender to do a side-by-side comparison between the FHA mortgage and the current non-FHA versions. It will soon become apparent which is the best value for your money, especially if you don't have a lot to invest in a down payment.

NEXT:  Can I Streamline an FHA Loan?

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FHA Loan Articles and Mortgage News

FHA Home Loans: 20% Down Is Not Necessary

August 15, 2019 - Do you really have to make a 20% down payment to get into a home loan? Not with an FHA mortgage. FHA loan program down payment minimums are 3.5% for borrowers with FICO scores at 580 or better. So why do people assume 20% down is required to buy a home?

Compensating Factors for Home Loan Approval

August 13, 2019 - FHA home loan rules in HUD 4000.1 (the FHA Single Family Home Loan Handbook) say the lender can, under certain circumstances, use compensating factors in cases where the borrower’s other financial qualifications may be less ideal than others.

FHA Home Loan Rules You Should Know: Credit Checks

August 11, 2019 - Some borrowers don’t fully understand the home loan process, which can lead to disastrous results if you don’t understand the lender’s approach to credit checks and other loan underwriting procedures.

FHA Home Loan Rules: First-Time Home Buyers

August 9, 2019 - What are the FHA home loan rules for first-time home buyers? If that seems like a trick question to you, you’re on the right track. There are NO FHA home loan rules that pertain exclusively to first-time home buyers.

What Does Your Monthly FHA Mortgage Include?

August 8, 2019 - If you are in the planning stages for an FHA home loan, it’s important to begin budgeting for your home loan-related expenses including appraisal fees, home inspection fees, any required pest control, hazard insurance, and other costs.

FHA.com Reviews

FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!