Real Estate Insider Blog

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24
Sep
2018

Best FHA Loans of 2018

By U.S. News Staff

For most Americans, the purchase of a home is made possible with a mortgage. However, saving a 20 percent down payment is an unattainable goal for many would-be buyers in areas with high home prices. Compounding the challenge are strict underwriting requirements, including some that were put into place to protect the housing market from a crash. Underwriting is the process mortgage lenders use to determine whether to approve a loan, based on the borrower’s risk profile.

The Federal Housing Administration, or FHA, loan program was created to help Americans buy homes following the Great Depression, and it remains a popular choice for people who need an affordable mortgage option. FHA loans are a popular solution because they allow for smaller down payments, while also resolving some of the underwriting challenges borrowers face. FHA mortgages are made by lenders and insured by the Federal Housing Administration, a U.S. government agency. With a government guarantee, the lender can offer more flexibility in its underwriting requirements, including credit guidelines and the size of the down payment.

“If a borrower has good credit but limited cash on hand, other government-backed loans are available for less money down,” says Stephen Moye, senior loan officer for Citywide Home Loans. “For a borrower with a bankruptcy, foreclosure or other credit issue, the FHA loan has a much lower barrier to entry.”

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