One of the biggest misconceptions of people now is thinking that the FHA home loan programs that are available are similar to the other home loans that are being offered by different agencies and companies. While it is true that the FHA has been created to help people finance their houses, it fell into hard times back in the 1990s because of the increase in the amount of houses that are being sold at that time.
The FHA was able to bounce back however and instead of offering the typical home loan programs, the programs now are made specifically to insure the loans that people will make to purchase their very own homes. This means that if for example, you would need a loan to purchase your dream home in California; you would need to find a lender that will lend you a large amount of money. To be sure that the money you lent will not be called off the moment you default in paying for the monthly fee, having an FHA loan program will make sure that they will pay for the amount that you weren’t able to give.
You may be wondering where the FHA gets the amount that they will pay for the money that you lent in case you cannot pay for the loan anymore. This is how it will work: The FHA requires borrowers to pay an upfront fee of 1%. Also, there are monthly fees that would have to be paid for the insurance as well. There have been some instances when the borrower defaults on paying for the FHA loan program. When this happens, the FHA collects insurance premium to continue paying for the mortgage.
There are some people who are not too sure if they should get the FHA home insurance program because for some, it may be just an expense that they do not have to pay for. If you are secure in your job and you know that you can pay for the money that you borrowed from the lender then you may not need to apply for the FHA home insurance program anymore. Some people think that they need it for a variety of reasons but the truth is that the loan programs that FHA has are not for everyone. If you are thinking about applying for a home loan program, weigh the pros and cons first. Think hard if you really need it.
Once you decide that you truly need it that is the time when you can start improving your credit score. While the FHA still gives chance to people who have already experienced foreclosure and bad payment records in the past, the borrower must first prove that he has already improved his payment records. He can show this by showing credit card billings and other records that show his improvement in paying off debt. If the person still has bad credit score, the chances of getting approved for a FHA loan may be a bit murky.