With all of the choices out there, finding the right loan can be a frightening task. FHA loans are one of the more commonly available options.. The Federal Housing Administration allows for first time propery buyers to affordably buy a residence. (The cool thing is that you don't even have to technically be a first time buyer.) Be sure to keep FHA in mind as it can provide an excellent program if you don't already have an FHA loan.

So what is FHA all about? The FHA itself does not actually write the loans. If you want to obtain an FHA loan, you will still be going with a traditional loan originator. You can get them from banks or loan companies.

The variation with an FHA mortgage is that the FHA will insure the loan for the bank.. FHA is backed by something called PMI (Private Home loan Insurance). When banks require you to get private mortgage loan insurance, it is to prevent them from losing money on the mortgage loan in the event of default. Be careful - the largest drawback to an FHA loan is that the PMI insurance is obligated, and built into the loan - resulting in slightly higher payments.. Traditional home loans only require PMI if you're putting less than 20% down on the propery, but FHA home loans require it regardless of your down payment, or how much equity you have in the propery.

Another big advantage of the FHA programs is that you do not have to make a large down payment. This allows for a lot more people to pursue the dream of house ownership without a large down payment. Many traditional home lenders require a much higher percentage down, which eliminates a huge portion of the market.

FHA loans are also offered with no prepayment penalty. Be aware - there are still loans (mostly from predatory mortgage loan originators) that involve substantial fines if paying off the mortgage early. There isn't a concern about that with an FHA home loan because there are never pre-payment penalties with a true FHA home loan.

To decide if an FHA loan is best for you, be sure to discuss your options with your local loan professional.