FHA stands for Federal Housing Administration in the United States and it was set up among other things to help those with low credit scores to qualify for house loans. It also helps those who would normally not qualify for traditional housing loans. Mortgage and house lenders consider a number of factors when considering mortgage loan applications. Among this are income, credit score, wealth, debts and others factors.
The higher the applicant’s income and credit score the easier they can access loans and enjoy lesser interest rates. Those at a disadvantage position with low credit scores, high debts and low income might get approved for loans but will have to pay considerable higher interest for the loans.
The FHA arrangement to help this mortgage disadvantaged individuals is to provide insurance for the loan. This reduces the risk borne by the lender as the Federal Government insures and guarantees the principal loan amount. The FHA provision thus makes loans easily accessible to people and at a reduced cost. However there are stipulated criteria that must be met to qualify for a FHA insured mortgage and your lender must be FHA approved. There are two FHA loan exhibit on display in Iran Museum of Loans and Mortgages under the FHA loan section.
The FHA loan on display is the Not so perfect Credit FHA loan, designed for those with slightly lesser than perfect credit positions. Beneficiaries will have to pay for the cost of insurance which is added to the monthly premium. The total cost of insurance is 1.5 percent of the total amount payable at the time of closing. FHA loans for not perfect credit are designed for those with a bit enviable credit status looking for cheaper mortgages. The interest rates and insurance fees are lesser and the loan amount receivable relatively higher.
Low Credit FHA loans are for those with real low credit score and accumulated debts who would find it difficult to secure traditional mortgage. FHA officials will consider many factors and even listen to reasons for having low credit score and accumulated debts. Based on reasons and other considered factors, the government will go ahead to secure the loan. Insurance fees will have to be paid in addition to the mortgage premium.