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FHA LoanFHA means Federal Housing Administration. The Federal Housing Administration (FHA) was established in 1934 to improve housing standards and conditions and to provide an adequate home financing system through insurance of mortgages.US Department of Housing and Urban Development (HUD) and The Federal Housing Administration (FHA) helps individuals become homeowners. Families that would otherwise be excluded from the housing market are finally able to buy the homes of their dreams. Today, FHA is particularly important to minority and first time homebuyers. The FHA provides mortgage insurance on loans made by FHA approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. The requirements are not as high for an FHA loan as they are for Fannie Mae or Freddie Mac Loans. Plus, a borrower can purchase a home with only 3 percent down. HUD assumes some of the risk on an FHA loan. FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance. FHA Mortgage Insurance exist because, unlike conventional loans that adhere to strict underwriting guidelines, FHA insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property, whichever is longer. FHA mortgages may be easier to qualify for since they require a low down payment, and may offer low interest rates. The catch is you can only borrow up to a certain amount, and you have to pay both an up front and monthly premium for insurance. The up front cost, usually 1.5 - 2 percent of the loan amount, can be lumped onto the loan and paid off over time. To be eligible you must plan to live in the home that you purchase. In some cases a borrower can qualify for gift programs which allow them to purchase a home with no money out of pocket. There are a variety of FHA loan programs that you can take advantage of. A mortgage broker can give you advice as to which is best for you. FHA is the only government agency that operates entirely from its self generated income and costs the taxpayers nothing. The proceeds from the mortgage insurance paid by the homeowners are captured in an account that is used to operate the program entirely. FHA provides a huge economic stimulation to the country in the form of home and community development, which trickles down to local communities in the form of jobs, building suppliers, tax bases, schools, and other forms of revenue. If you already have an FHA loan , you may want more information about an FHA Streamline Refinance loan. Some History About The FHA Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965. 1. When the FHA was created, the housing industry was flat on its back.During the 1940s, FHA programs helped finance military housing and homes for returning veterans and their families after the war. In the 1950s, 1960s and 1970s, the FHA helped to spark the production of millions of units of privately owned apartments for elderly, handicapped and lower income Americans. When soaring inflation and energy costs threatened the survival of thousands of private apartment buildings in the 1970s, FHA's emergency financing kept cash strapped properties afloat. The FHA moved in to steady falling home prices and made it possible for potential homebuyers to get the financing they needed when recession prompted private mortgage insurers to pull out of oil producing states in the 1980s. By 2001, the nation's homeownership rate had soared to an all time high of 68.1 percent as of the third quarter that year. The FHA and HUD have insured over 34 million home mortgages and 47,205 multifamily project mortgages since 1934. FHA currently has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. In the more than 60 years since the FHA was created, much has changed and Americans are now arguably the best housed people in the world. HUD has helped greatly with that success. U.S. Department of Housing and Urban Development 451 7th Street S.W. Washington, DC 20410 Telephone: 202-708-1112 TTY: 202-708-1455 For more information visit: www.hud.gov/ or www.hud.gov/fha/loans.cfm |
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