A simple story from an FHA borrower:
My family and I were wanting to buy a new house. We had been saving for a few years and had been living below our means just so we would be able to purchase a house that we all loved.
We really wanted to get an FHA loan since they were so popular with first time home buyers like us. That type of loan was insured by FHA, the Federal Housing Administration. That meant that the bank took less of a risk loaning to us in case we defaulted on the loan. Not that we had planned on doing that, but you never do know what the future holds.
We had done some research on FHA loans because friends of ours had done this kind of loan recently and thought we should try to get an FHA loan, too. We learned a lot. Usually an FHA loan was the easiest loan to get. The down payment was pretty low compared to other types of mortgage loans and you could still get a loan if you did not have perfect credit.
Since the time was coming quick that we were ready to start our home buying venture, we started looking at FHA mortgage rates. The rates were similar to conventional loans, but the other fees we would be paying were higher. We would have to take out mortgage insurance and that would make our payment a little bit higher than if we did the traditional mortgage loan. The problem with that was our credit was probably not good enough and we did not have a large down payment needed for a conventional loan.
There were a few other catches to FHA loans. One thing was the house had to meet FHA standards and it must be appraised by someone the FHA approves. The people we talked to did not seem to think that would be a problem with the houses we were looking at so that was good for us.
The FHA mortgage rates were holding steady and it seemed like a good time for us to jump in and get started. We went ahead and filled out the FHA paper work and started looking at houses. There were quite a few houses that we liked and we were getting quite excited. Also, the FHA paper work all came back good and we were happy about that, too.