Definition of FHA:
What does FHA stand for? FHA stands for Federal Housing Administration. It’s part of the United States Department of Housing and Urban Development (HUD) that provides various loan programs that make getting a home loan easier for those with limited credit experience, a small down payment, limited funds to make monthly payments and/or for those who may not qualify for other types of loans. The FHA allows applicants to qualify for mortgages by providing lenders with protection against losses resulting from homeowners defaulting on their mortgage loans. The lenders, therefore, have less risk when approving FHA loans, as long as the loans meet mandatory requirements established by FHA.
History & Origins
According to HUD.GOV, Congress created the Federal Housing Administration in 1934 to address challenges millions of Americans were facing in the housing industry. Since then, the FHA has stimulated the economy through home and localized development programs, trickling growth and opportunity down to local communities in the form of jobs, building suppliers, tax bases, schools and other forms of revenue. Today they are the largest insurer of mortgages in the world, insuring over 34 million properties.
Real Life Applications
FHA mortgage loans typically offer more flexible underwriting guidelines than conventional loans. The federal government recently reduced Mortgage Insurance Premiums on FHA loans, making it easier for some to qualify for a home or reduce their payments. Here are some features of the new program:
- Lower credit scores acceptable
- Up to 30-year fixed rate term
- Down payment as low as 3.5%
- Refinance with limited equity
- 100% of the funds of a gift from a family member may be used for down payment and closing costs
- No pre-payment penalties
- Refinancing option for current high cost mortgages
- Non-occupant co-borrowers acceptable
The Last Word
FHA currently has 4.8 million insured loans for single family mortgages and 13,000 insured multifamily projects in its portfolio and can be an attractive loan option if you meet their criteria. If you are interested, be sure to educate yourself of your options and contact a professional to learn more.