There are many good reasons to choose an FHA loan, especially if one or more of the following apply to you:

• If you're a first-time homebuyer
• If you don't have a lot of money to put down on a house
• If you want to keep your monthly payments as low as possible
• If you're worried about your monthly payments going up
• If you're worried about qualifying for a loan
• If you don't have perfect credit
• If you're worried about what will happen if you fall behind on your payments

If any of these things describe you, then an FHA loan may be right for you. An FHA-insured loan offers many benefits and protections that you won't find in other loans including:

Lower rates: An FHA loan has competitive interest rates because the Federal government insures the loans for lenders. Always compare an FHA loan with other loan types.

Easier to qualify: Because FHA insures your mortgage, lenders may be more willing to give you loan terms that make it easier for you to qualify.

If you have less than perfect credit: You don't have to have perfect credit to get an FHA mortgage. In fact, even if you have had credit problems, such as a bankruptcy, it's easier for you to qualify for an FHA loan than a conventional loan.

More protection to keep your home: The FHA has been around since 1934 and will continue to be here to protect you. Should you encounter hard times after buying your home, the FHA has many options to help you keep you in your home and avoid foreclosure.

FHA does not give money to people for a home and it does not set the interest rates on mortgages it insures. FHA insures loans for lenders against defaults.

You may use an FHA-insured mortgage to purchase or refinance a new or existing 1-4 family home, a condominium unit or a manufactured or mobile home (provided it is on a permanent foundation).

What types of loans does FHA offer?

Fixed rate loans - Most FHA loans are fixed-rate mortgages (loans). In a fixed rate mortgage, your interest rate stays the same during the whole life of the loan, normally 30 years. The advantage of a fixed-rate mortgage is that you always know exactly how much your monthly payment will be, and you can plan for it.

Adjustable rate loans - Most first-time homebuyers are a little stretched financially, so they want payments as low as possible at the beginning. With FHA's adjustable rate mortgage (ARM), the initial interest rate and monthly payments are low, but these may change during the life of the loan. FHA uses the 1-Year Constant Maturity Treasury Index (1 Yr CMT the most widely used index, to calculate the changes in interest rates. An index is a measure of interest rate changes that determine how much the interest rate on an ARM will change over time.

The maximum amount that the interest rate on your loan may increase or decrease in any one year is 1 or 2 percentage points, depending upon the type of ARM you choose. Over the life of the loan, the maximum interest rate change is 5 or 6 percentage points from the initial rate, again depending upon the type of ARM you choose. The advantage of an ARM is that you may be able to afford more house; because your initial interest rate will be lower, as will your payment.

Purchase - Rehabilitation loans - Sometimes you might see a home you'd like to buy, but it needs a lot of work. FHA has a loan for rehabilitating and repairing single-family properties called the 203(k) loan. You can get just one mortgage loan which includes the mortgage and the cost of repairs combined. The mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. The advantage of this loan is that you can buy a home that needs a lot of work, but you still have only one mortgage payment, and you can complete the repairs after buying the home. FHA 203(k) loans offer much better rates and terms than traditional rehabilitation loans, and can be converted into a standard FHA loan utilizing an FHA Streamline loan.

How does a FHA loan Compare to a Conventional Loan? - Conventional loans usually require a larger down payment. And, if you have less than perfect credit you may not qualify for many conventional loans and find yourself being offered loans with higher interest rates and/or fees than you expected. The best thing to do is compare the cost of the conventional loan to an FHA loan line-by-line. What are the fees on each? What is the interest rate? How much is the mortgage insurance on each? How much down payment is required? For some borrowers, a conventional loan may be less expensive. For many others, it will be more expensive than FHA.