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FHA FIXED RATE MORTGAGE
Through this program, HUD's Federal Housing Administration (FHA) insures mortgages made by qualified lenders to people purchasing
or refinancing a home of their own.
FHA's mortgage insurance programs help low- and moderate-income families become homeowners
by lowering some of the costs of their mortgage loans. FHA mortgage insurance also
encourages lenders to make loans to otherwise creditworthy borrowers and projects
that might not be able to meet conventional underwriting requirements, by protecting
the lender against loan default on mortgages for properties that meet certain minimum
requirements--including manufactured homes, single-family and multifamily properties,
and some health-related facilities.
Section 203(b) is the centerpiece of FHA's single-family insurance programs-the
successor of the program that helped save homeowners from default in the 1930s,
that helped open the suburbs for returning veterans in the 1940s and 1950s, and
that helped shape the modern mortgage finance system. Today, FHA One- to
Four-Family Mortgage Insurance is still an important tool through which the
Federal Government expands homeownership opportunities for first-time
homebuyers and other borrowers who would not otherwise qualify for
conventional loans on affordable terms, as well as for those who
live in underserved areas where mortgages may be harder to get. In
FY 1997 FHA insured more than 790,000 homes, valued at almost $60 billion, under
this program. FHA currently insures a total of about 7 million loans valued at
nearly $400 billion. These obligations are protected by FHA's Mutual Mortgage
Insurance Fund, which is sustained entirely by borrower premiums.
Type of Assistance
This program provides mortgage insurance to protect lenders against the risk of
default on loans to qualified buyers. Insured loans may be used to finance the
purchase of new or existing one- to four-family housing, as well as to refinance
debt. Section 203(b) has several important features:
-- Downpayment requirements can be low. In contrast to conventional mortgage
products, which frequently require downpayments of 10 percent or more of the
purchase price of the home, single-family mortgages insured by FHA under Section
203(b) make it possible to reduce downpayments to as little as 3 percent. This is
because FHA insurance allows borrowers to finance approximately 97 percent of the
value of their home purchase through their mortgage, in some cases.
-- Many closing costs can be financed. With most conventional loans, the borrower
must pay, at the time of purchase, closing costs (the many fees and charges associated
with buying a home) equivalent to 2-3 percent of the price of the home. This program
allows the borrower to finance many of these charges, thus reducing the up-front cost
of buying a home. FHA mortgage insurance is not free: borrowers pay an up-front
insurance premium (which may be financed) at the time of purchase, as well as
monthly premiums that are not financed, but instead are added to the regular
mortgage payment.
-- Some fees are limited. FHA rules impose limits on some of the fees that lenders
may charge in making a loan. For example, the loan origination fee charged by the
lender for the administrative cost of processing the loan may not exceed one percent
of the amount of the mortgage.
-- HUD sets limits on the amount that may be insured. To make sure that its programs
serve low- and moderate-income people, FHA sets limits on the dollar value of the
mortgage loan. The current mortgage limits can be found at
www.fhaloan.com/lending_limits.cfm. These figures vary
over time and by place, depending on the cost of living and other factors (higher limits
also exist for two- to four-family properties).
Eligible Customers:
Anyone intending to use the mortgaged property as their primary residence is eligible
to apply for mortgage insurance. However, the program is not open to investors.
Application:
Any person able to meet the cash investment, the mortgage payments, and credit
requirements can apply. The program is limited to owner-occupants. Applications
are made through an FHA-approved lending institution. Most lenders who use this
mortgage insurance product, however, make their requests through a provision
known as Direct Endorsement, which authorizes them to consider applications without
submitting paperwork to HUD.
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FHA HOME LOAN
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FHALoan.com is a private mortgage company specializing in fha home loans and is not associated with the federal government or HUD / FHA.
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