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The Helpful Guide To FHA Loans

If you are looking to buy a house, there are several programs that will help you to buy a house. Some of these programs you will be able to put down a lower downpayment (sometimes as low as 0%). This depends on your credit, but, some programs also allow for lower credit scores as well.

One of these mortgage assistance providers is the Federal Housing Administration or FHA for short.

What is a FHA Loan?

An FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA).

The Federal Housing Administration (FHA) is the largest mortgage insurer in the world with an active insurance portfolio of over $1.3 trillion. Each year, FHA helps more than a million homebuyers achieve the dream of sustainable, affordable homeownership of single-family homes. The FHA also insures and backs the mortgages of multi-family homes as well.

Many people think that you are getting a loan from the FHA, instead, the FHA works with banks and mortgage providers and guarantees the loan that you are getting. You will be making your monthly payments to the bank, not the FHA.


Types of FHA Loan Programs


203(B) BASIC HOME MORTGAGE LOAN

What is the purpose of this program?

To provide mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings, and loan association and the mortgage is insured by HUD.

203(H) MORTGAGE INSURANCE FOR DISASTER VICTIMS SECTION

Summary:

The Section 203(h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.

Purpose:

Through Section 203(h), the Federal Government helps victims in Presidentially-designated disaster areas recover by making it easier for them to get mortgages and become homeowners or re-establish themselves as homeowners.

Type of Assistance:

This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area and if their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary. Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner. Like the basic FHA mortgage insurance program it resembles (Section 203(b) Mortgage Insurance for One to Four Family Homes), Section 203(h) offers features that make recovery from a disaster easier for homeowners:


203(K) REHAB MORTGAGE INSURANCE

Summary:

Section 203(k) insurance enables homebuyers and homeowners to finance both the purchase (or refinancing) of a house and the cost of its rehabilitation through a single mortgage or to finance the rehabilitation of their existing home.

Purpose:

Section 203(k) fills a unique and important need for homebuyers. When buying a house that needs repair or modernization, homebuyers usually have to follow a complicated and costly process. The interim acquisition and improvement loans often have relatively high interest rates, short repayment terms and a balloon payment. However, Section 203(k) offers a solution that helps both borrowers and lenders, insuring a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a property. Section 203(k) insured loans save borrowers time and money. They also protect the lender by allowing them to have the loan insured even before the condition and value of the property may offer adequate security.


(SECTION 220) MORTGAGE AND MAJOR HOME IMPROVEMENT LOAN INSURANCE FOR URBAN RENEWAL AREAS

This federally insured loan is used to finance mortgages for housing in urban renewal areas, where concentrated revitalization activities have been undertaken by local government, or to alter, repair, or improve housing in those areas.

Nature of Program: HUD insures mortgages on new or rehabilitated homes or multifamily structures located in designated urban renewal areas and areas with concentrated programs of code enforcement and neighborhood development. HUD insures supplemental loans to finance improvements that will enhance and preserve salvageable homes and apartments in designated urban renewal areas.

Applicant Eligibility: Investors, builders, developers, individual homeowners, and apartment owners.

Legal Authority: Section 220 of the National Housing Act (12 U.S.C. 1715k). Regulations are at 24 CFR part 200, subpart A, and part 220.

Current Status: The Multifamily program is active. The Single Family program and Supplemental Loan program are not active.


Energy Efficient Mortgage Loan

The Energy Efficient Mortgage Loan program helps current or potential homeowners significantly lower their monthly utility bills by enabling them to incorporate the cost of adding energy efficient improvements into their new home or existing housing. This FHA program eliminates the need for homeowners who are interested in making their home more energy efficient to take out an additional mortgage loan to cover the cost of the improvements they intend to make to their property. The program is available as part of an FHA insured home purchase or by refinancing your current mortgage loan.


234(c) FHA Condominium Loans

FHA Condominium Loans are specifically geared toward those who purchase housing units in a condominium building. Condominium ownership, in which separate owners of individual units jointly own the development’s common areas and facilities, is for some a very popular alternative to home ownership. Insurance for this type of housing is provided through FHA Section 234(c). This FHA insurance is very important for low and moderate-income renters who wish to avoid the risk of being displaced when their apartments are converted into condominiums.


These are just some of the program that the FHA provides. You can find out more at their website.

Hope this Guide to FHA loans was helpful for you!

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