The best mortgage rates are typically found in FHA-backed loan programs. Lenders are simply willing to offer better APRs and overall loan terms when they know the repayment of their funds is guaranteed by the U.S. federal government. Not all FHA-approved lenders offer the same APRs. Even so, most FHA loans are typically more affordable than traditional mortgage loans overall.

Additional terms and conditions also apply. For example, getting approved for an FHA loan typically requires you to purchase homeowners insurance. This is also a typical requirement for traditional mortgage loans as well. Why is the purchase of homeowners insurance prioritized by both FHA-approved and traditional lenders alike?

Homeowners insurance helps guarantee your home is covered in the event of damage due to multiple destructive situations. This guarantee gives lenders additional assurance their investments will not be lost to unforeseen circumstances. 

Mortgage insurance might also be required. Mortgage insurance protects lenders in the event a borrower ceases making his or her monthly mortgage payments. Both homeowners and mortgage insurance are additional expenses but are required as conditions of approval for FHA loans.

Refinance loans backed by the FHA also have several additional terms and conditions. A refinance loan involves a homeowner either restructuring the mortgage or taking out an entirely new mortgage loan on their current home. Refinance loans are generally proposed to lower APRs, reduce monthly payment amounts or both.

FHA streamline refinance loans are fast and convenient methods of converting a current FHA loan into an entirely new loan. If you already own the home of your dreams but are experiencing financial hardship, this type of loan is worth your consideration. An FHA streamline refinance loan helps you keep the home you live in albeit with reduced financial burden.

FHA rate-and-term refinance loans are also available. These types of loans permit a homeowner to refinance up to 97.75 percent of the value of his or her home, despite a relatively low FICO score. An FHA rate-and-term refinance loan also wraps closing costs into the total loan amount, making it easier to get the loan funded. While these types of FHA loans are convenient, they are not quite as lenient pursuant to FICO scores as some other FHA loan programs.

For example, while some FHA-approved lenders approve applicants with FICO scores as low as 500, FHA rate-and-term refinance loans are only available to borrowers whose FICO scores are 580 and higher. Borrowers must also already be carrying another FHA loan to qualify. These loans do provide additional benefits as well, however.

For example, one highly beneficial feature of this loan program is the forgoing of home appraisal requirements or additional income and employment verification.