What is the FHA (Federal Housing Administration)

At the time of apply for a mortgage in the United States, you have a wide variety of options at your fingertips. If you don't qualify for a conventional home loan, you can always go to the FHA or another government agency.

Article content

1. Brief historical overview of the FHA
2. Basic functions of the FHA
3. FHA mortgages
4. Types of FHA mortgages

Given its importance, we will see in more detail how this institution appeared and what its objective is.

Brief historical overview of the FHA

The Great Depression was a time of drastic change for working families who were considered middle or lower class. During this crisis, the mortgages had terms of 3 to 5 years, an interest rate above 50% and they did not have repayment plans. In addition, the banking crisis forced the collection of overdue loans, there was no refinancing and many lost their homes.

The precarious conditions led to the restructuring of the financial system and the creation of the National Housing Law in 1934. At the initiative of former President Franklin Delano Roosvelt and the support of Congress, that year the
Federal Housing Administration (FHA). However, the advantages it offered to get a financed home were limited to whites.

This entity became part of the HUD (Department of Housing and Urban Development) in 1965 and the implementation of this program made it easier for people to qualify with fewer requirements to get a mortgage and reduced the risk for lenders. This situation generated an increase in the market for single-family homes, boosting property ownership in the US, reaching its maximum in 2004 (69.4%).

Basic functions of the FHA

The creation of the FHA was based on giving North American citizens the possibility of get a decent home, even being in unfavorable conditions. This government agency has several programs dedicated to providing financing to repair your home and also so that you can buy a new or used house.

In another sense, this federal body gives you the ability to obtain the amount of money for which you qualify based on your current financial conditions. In addition, it provides advice to banks and lenders to reduce risk when granting mortgages. Throughout this process, Federal Housing Administration acts as an intermediary.

Based on the above, no You must understand that this agency is in charge of lending you the money that you are managing through its system. This body contacts its network of affiliated institutions to get the resources that people request. For this reason, their mortgage loans are known as "FHA insured”, Being backed by the government.

FHA mortgages

Here are some of the mortgages marketed by financial institutions in the United States with which you can take advantage of the assistance offered by the FHA to be able to access a mortgage loan with less demanding requirements:

FHA loan

• Interest: Fixed or variable
• Deadline: Consult

More infoRequest
FHA mortgage

• Interest: 3.75%
• Deadline: 30 years

More infoRequest

Types of FHA mortgages

Although we have already covered some types of mortgages that you have access to in the United States, this time we will specify a little more. When you go to the FHA with your case, the available options will be the following:

• Section 245 Loan. This program is specially designed for people who expect their income to improve in the near future. Section 245 refers to the Graduated Payment Mortgage (Graduate Payment Mortgage), which starts with low monthly payments that then go up over time. There is also the Growth Equity Mortgage (increase in value mortgage), which has increases in the main monthly payments and can take less time to pay it off.
• Credit for improvements 203k. This alternative allows you to borrow money both to make repairs to your current home and to buy a home. In addition to including the possible costs of repairs or renovations, it can help you if you do not have much money for the closing costs after giving the down payment.
• HECM program. Also know as Home Equity Conversion Mortgage (Home Equity Conversion Mortgage), is an option for seniors 62 and older. It works like a reversible mortgage loan that gives them financing based on the value of their homes and at the same time allows them to retain title to the property. You can choose between a line of credit or fixed monthly payments.
• Energy efficiency program. Similar to the 203k, it is intended for the application of improvements in your home to reduce expenses related to electricity. It is a mortgage loan that works under the following premise: a more rational energy consumption lowers your bills, giving you more capital to assume this commitment. The most frequent measures include improving the insulation, the installation of wind systems or solar panels.

Although the application process is the same, the big difference from FHA loans is that the lender can omit your credit history. Instead, you could review your payment records (services, rent, among others) or your work experience from the last 2 years. As long as you have an acceptable credit score now, you can apply for financing having been evicted or declared bankrupt.

Organisms such as Federal Housing Administration they are essential if they contribute to popular welfare. If you are looking for mortgage alternatives, be sure to consult the Business Blog comparator.