Now for the most usual misconception that people have when asking about what is FHA loan. They assume that it is a loan directly issued from government tax funds. This is incorrect. The federal government is not the one giving out these funds for housing loans because going into this kind of business is not in the government. This is something that only private lenders are in the business of doing. This specific misconception really turns of people. Think about it, anyone would be angry if they thought their hard earned tax payments were being used to fund the loans of people. The FHA only insures the loan. This means that if the borrower defaults then the government has it covered. Now this might anger even more people. Why should the taxpayers pay for the defaulted loan of those people who could not afford their housing loan? Well, once again, this is not the whole truth.
This is because the FHA does not use tax dollars at all. This is because whenever when a borrower applies for an FHA housing loan and gets one Article Search, he or she will pay for a mortgage insurance premium. This insurance premium payments serve as a way of getting income for the FHA this is the money they use for paying those uncommon instances when borrowers default.
So perhaps now the question of what is FHA loan is finally answered. One should seriously consider this offer especially for those who have low or middle income salaries and less than perfect credit.
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