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An FHA loan is a loan insured by the FHA, or Federal Housing Administration. An FHA loan is one type government loan along with the VA loan, and others. An FHA loan has a mortgage principal limit set by the FHA that depends upon property location. Like any other mortgage, the risk of default on an FHA loan increases as the down payment decreases, yet the FHA allows a very low down payment on an FHA loan because of its mandate to make housing more affordable for low-income and moderate-income families. An FHA loan may be assumable if the property owner changes. Whether or not any restrictions on assumption exist depends upon when the FHA loan was originally obtained. Assuming an FHA loan lowers the cost of purchasing a home by eliminating many closing costs related to financing. |
