The general consensus among most people is that FHA mortgages and conventional mortgages do not differ all that much.  After all, the borrower still must go through most of the same application and approval processes, and the terms (length of loan and interest rate) usually don’t differ much from the conventional marketplace.

Of course, FHA loans (especially lately) are being highly touted as the best alternative in the near future for first time homebuyers and low to middle-income families alike.  For nearly 60 years, from their inception in 1934 up through the turn of the century, FHA financing was one of the most common ways that Americans financined their homes.  Now that subprime and ARM loans have lost steam, the the FHA is back.

‘Loss Mitigation’ is a term tied to the fact that FHA loans are financially ‘backed’ by the government, and it is something that consumers can sometimes overlook.  In fact, if a borrower falls behind on their payments due to anything from job loss to medical crisis, the lender can recover their lost income from the government and tack the costs onto the loan.  The borrower simply repays the  missed payments later on.

This little caveat of FHA mortgages allow many to avoid foreclosure and also make the products  more attractive to lenders as their investment is protected no matter the unexpected things that might arise that make it hard for a borrower to pay their mortgage.