What is FHA? FHA, is known as the Federal Housing Administration. FHA provides mortgage protection for lenders on loans in the United States. FHA insures mortgage loans on properties such as single and multi family homes, some commercial as well as manufactured homes.
Since its inception in 1934, FHA has been an integral part of lending. So what is FHA?
What Is FHA – The History
The Federal Housing Administration was founded in 1934 when congress created it in response to the Great Depression. Its focus was to carry portions of the National Housing Act. It later became part of HUD during the Department of Housing and Urban Development Act. FHA was created to stimulate home ownership. In the 1940s, only 2 out of every five households owned their home.
The FHA helped ignite the production of thousands of apartments and affordable housing for seniors. In the 1970s, the FHA helped save thousands of apartments from foreclosure as rising energy costs threatened their financial survival.
Until FHA existed, most loans were terms ranging from 3-5 years with balloon payments in the end. As a result, many people could not afford the substantial down payment and it barred them from owning a home.
What is FHA – Important Points
What is FHA? FHA’s primary focus is to help people become homeowners. By focusing on helping first time home buyers, FHA is able to bridge the gap between shortcomings of applicants and a lender’s requirements. Now, as long as an applicant expresses an ability to pay the loan payments and a stable income and payment history, they may qualify for a home loan even though lenders traditionally have more stringent guidelines. By guaranteeing the loans for the lender, the lender is motivated to lend to applicants that normally wouldn’t meet their standards.
FHA is the only government agency that operates completely from its own self-funded revenue. It doesn’t take a penny from tax payers to support its budget. Its income is derived from mortgage insurance premiums that it charges borrowers for insuring their loans to lenders. This becomes a win-win, as applicants are able to obtain home financing that they otherwise might not be able to obtain and lenders are protected against losses in the event of default on the loans.
One of FHA’s most popular programs is its REO or Real Estate Owned programs, where is offers for sale properties that have been previously foreclosed on. One of the hottest parts of this program is that qualified buyers can purchase these homes with a down payment as little as $100! This program substantially assists lower income families that struggle to save up the current down payment minimum of 3.5%. This program can reduce to cost of acquiring a home by thousands of dollars!
FHA provides a huge stimulation to the economy thru community development, job creation and better citizens. When people have a vested interest in their home and community, their neighborhoods tend to be safer as well. Now you know about the Federal Housing Administration, and no longer need to ask What is FHA?