FHA home loans are mortgages insured by the Federal Housing Administration. FHA loans allow lower income Americans to borrow money for the purchase of a home that they would otherwise not be able to afford.
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The FHA also provides Mortgage Refinance Loans. The FHA is not just a purchase option. It provides many options for stable and easy refi’s.
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The program was created during the Depression of the 1930s when the rate of foreclosures was very high. It was created to provide lenders with more insurance when providing housing opportunities to low income families.
FHA loan programs were and still are subsidized by government, but the original intent was to make them self supporting with insurance premiums paid by the borrowers.
Over time, private mortgage insurance companies assumed the rule of insuring loans, and now the FHA primarily serves people who can’t afford a normal down payment or do not qualify for PMI (private mortgage insurance).
FHA's mortgage programs are designed to lower the cost of a mortgage loan. FHA mortgage insurance also encourages lenders to make loans to creditworthy borrowers and projects that might not be able to meet conventional underwriting requirements.
They protect the lender against loan default on mortgages for properties that meet certain guidelines. These “properties” include manufactured homes, single and multi-family dwellings, and some health related facilities.
On 1 to 4 unit properties your down payment can be as low as 3% of the home’s purchase price with an FHA loan. Most of your closing costs and fees can also be included in the loan instead of paid “out of pocket”.
The FHA also insures adjustable rate mortgages (ARMs), which can be very beneficial to any homeowner when interest rates are high. This allows borrowers to obtain mortgage financing that is more affordable due to a lower initial interest rate. This interest rate is adjusted annually, based on certain market indices chosen by the FHA, and may increase or decrease over the life of the loan.
The FHA also assists in financing mobile homes and manufactured housing. They have 1 loan program for those who own the land that the home is on and another for mobile homes that are in mobile home parks.
For savings over the life of you loan, and home, you can include the costs of energy efficiency improvements into an FHA “energy efficient mortgage”. Click here to get detailed information about this FHA loan program.
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