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Published: Thursday, 1/8/2009

Your Mortgage Questions Answered

Q. What is an FHA loan?

A. An FHA loan is a mortgage loan that is insured by the Federal Housing Administration, a division of the Department of Housing and Urban Development. The FHA will insure a lender against loss in the event of borrower default, therefore encouraging lenders to make more loans to home buyers who might not otherwise qualify for home financing.

FHA loans are available with lower down payment requirements -- 3.5% beginning Jan. 1, 2009 -- and in many cases the loan-to-debt ratio, which determines how much you can afford in mortgage payments, is more lenient than a conventional loan would allow. Borrowers who use FHA loans are required to pay a mortgage insurance premium at the loan closing (which can be financed into the loan), plus a monthly amount that is included in the loan payment. The limit for an FHA loan varies by area, so check with your lender or go to https://entp.hud.gov/idapp/html/hicostlook.cfm and enter the state and county where you are looking.

Q. What is a VA loan?

A. A VA loan is a loan that is guaranteed by the Department of Veterans Affairs, or VA. The VA will guarantee that a portion of a loan made within its guidelines will be repaid to the lender in the event of borrower default.

In most cases VA loans are available only to qualified members/veterans of the U.S. armed services and there are specific guidelines for eligibility. These guidelines are outlined on the VA Web site at www.homeloans.va.gov or can be obtained by calling 1-800-827-1000. Depending on the amount of available entitlement benefits, a veteran can use a VA loan to buy a house with no money down, and the benefit can be used again. If a veteran wants to buy a different home, he/she can use a VA loan as long as the first home has been sold. The veteran is usually required to pay a funding fee with this type of loan.

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