Applying for a home loan for first time mortgage borrowers can be a daunting and confusing task. An alphabet soup family of words is used: FHA, HUD, VA, and more can describe a loan, an agency, or some other plan. How do you know which one is right for you? Well, for starters the Federal Housing Authority of FHA doesn't issue loans, but they do back them. With this in mind, many savvy mortgage companies gear their businesses to helping you obtain these loans especially if conventional financing it out of the picture. Should you work with an FHA lender? Sure, especially if you want to jump into the housing market with some government assistance.



The big advantage in an FHA back mortgage is that the risk of lending money to you is transferred from the lender to the FHA. If you have bad credit, no credit, or simply not enough money to put down on a home, you may still qualify for an FHA backed loan whereas a traditional loan not backed by the FHA could cause you to be turned down.

When visiting a mortgage broker or shopping online for a broker who has FHA experience, you will quickly learn a few things about these types of government backed loans:

Down payments can be extra low, as little as 3% of the home's value versus 5% through conventional loans. In addition, the FHA can require the seller to pay for part of your closing costs while allowing most of the remaining closing costs to be wrapped in the loan. This is particularly helpful for the person who has no spare cash to pay beyond the down payment. You won't be required to take out private mortgage insurance either which always adds to the cost of a loan.

Another feature of an FHA backed mortgage is that even the 3% figure can be funds that were borrowed or gifted from a relative or friend. Thus, if you don't even have a dollar to put down on a home, then other people's money can come to the rescue.

Yes, check with a mortgage company familiar with the FHA and how this particular program works. A home that wasn't affordable to you conventionally could now be within your reach thanks to the help of a qualified mortgage professional who is familiar with the ins and outs of the FHA.