FHA - A More Lenient Mortgage Option

The office of the Federal Housing Administration, or FHA, was established by Congress in 1934 to assist a wider range of Americans purchase property. It is currently the largest insurer of mortgages in the world. Since the inception of the FHA, homeownership has risen significantly in the United States, mainly because of easier access to mortgage financing by the general public. During tough economic times the FHA has played an important role in proving access to affordable mortgage financing for the American public.

About FHA Mortgages

According to the Housing and Urban Development Department (HUD), the insuring body for FHA loans, homeownership rates in the United States were roughly at 40% of the population at the inception of the FHA and have recently climbed to a 68% homeownership rate. One to four unit owner-occupied mortgages closed by FHA approved-lenders which meet the requirements established by FHA are insured. Mortgage insurance provided by the FHA protects lenders from losses in case of foreclosure.

Homeowners who use FHA financing pay an upfront mortgage insurance premium (currently 1.75% of the mortgaged amount). Homeowners also pay a monthly mortgage insurance premium which can be as high as 1.35% annually (depending on percentage down and loan term).

The FHA is self-funded, meaning the upfront and annual mortgage insurance premiums paid by homeowners are used to pay any claims of loss by lenders from foreclosures.

FHA Benefits for Home Buyers

• Lower down payment requirements (as low as 3.50)
• Can be used with government and approved non-profit down payment assistance programs
• Accepts lower credit scores than conventional financing
• Has programs for individuals who have experienced job loss, bankruptcy, and foreclosure
• Typically requires no reserve payments
• Allows gifts for down payment
• Accepts alternative credit
• Allows rate and term refinancing to 96.5% of value of home (with appraisal)
• Offers streamline refinancing (without appraisal)

Types of FHA Loans

• 30 and 15 year fixed rates
• Adjustable rates
• Rehabilitation
• Energy-efficient improvements
• Condominiums
• Manufactured homes

The FHA offers mortgage financing for cash strapped borrower and individuals who have experienced financial setbacks in the past. Lower income households may find the FHA lending requirements much easier to qualify for than standard conventional financing. If you are just starting to look for a house or have been turned down for mortgage financing, contact an approved FHA lender for a second opinion. The FHA loan may be the right tool for your family’s path to homeownership.

Source of Article: https://www.lender411.com/fha-loan-benefits/