FHA Programs and Loans
With increasing taxes and mortgage prices, buying a home may seem out of reach for many people. The Federal Housing Administration has several programs though to help people become home owners. The Federal Housing Administration, or FHA, was established in 1934 in response to the massive foreclosures and loan defaults that took place in the 1930’s. The idea was to provide people with an opportunity to become home owners, at affordable rates, along with providing sufficient insurance to mortgage lenders.
FHA has several programs which may benefit a wide range of people. FHA-approved mortgages are especially good for first time home buyers. This article will give a brief overview about how FHA works and what house ownership programs it offers.
Advantages of FHA loans
To put it simply, FHA, which is a part of HUD, insures the borrower’s loans so that creditors and lenders may offer them a better deal. This means lower down payments, lower closing costs and easy credit eligibility criteria.
A borrower may not have perfect credit, or be able to pay the traditional down payment of 20%; in which a FHA loan can help. FHA requires a down payment of 3.5% and insures the loan for the borrower. An alternate to FHA insured loans can be PMI, but that may not be such a great option as PMI makes the mortgage more costly.
FHA does not give loans itself, but acts as a mediator between the creditor and the borrower, ensuring the best deal for the borrower. People with not-so-perfect credit, or those who may have faced bankruptcy, can still qualify for an FHA loan. A FHA approved appraiser will first appraise the house and ensure it fulfills the criteria of FHA, and then qualify a borrower for the loan.
Another great advantage of FHA programs is that the loan is assumable. This means if the borrower decides to sell the house mid-way into the loan term, the loan is assumable by the buyer.
FHA Insured Programs
Some of the popular FHA loan programs include:
Adjustable Rate Mortgages (ARM)
This FHA loan is a HUD mortgage, and is a mortgage with adjustable rates. ARM has been drawn up specifically for families with low-to-moderate income, trying to make their way into home ownership. Unlike fixed mortgages where the interest rate is uniform throughout the term of the loan, an ARM periodically shifts in interest rates. The initial rate is usually lower than a fixed rate loan.
Fixed Rate Loans
On a fixed rate, these loans may be beneficial for first time buyers. The interest rate remains the same throughout the life of the loan. This allows the borrowers to finance almost 97% of their home and closure costs.
Energy Efficient Mortgage (EEM)
FHA energy efficient loans help potential buyers lower their monthly bills by incorporating energy efficient features in their homes. The cost for these features can be added up in the FHA house loan of the FHA refinancing mortgage.
FHA Loans for Manufactured Units
FHA also finances loans for manufactured units and mobile homes. For this, they offer two types of loans; the Manufactured Home Lot and Combination Loan Insurance. These help potential buyers purchase the manufactured unit, as well as the land it will be placed on. The other Manufactured Home program helps with getting a unit which may be mobile.
Home Equity Conversion Mortgages for Seniors (HECM)
FHA helps those citizens who are of the age of 62 or older by letting them convert a part of their equity into cash. Reverse mortgages are popular among the senior citizens who have certain equity in their houses and want to supplement their income. With HECM, FHA insures this mortgage for the citizens.
These are the 5 most common FHA programs that can be helpful in a wide variety of circumstances. Look into FHA for assistance in getting an affordable mortgage.