The Federal Housing Administration And Mortgage Insurance
The FHA, or Federal Housing Administration, provides mortgage insurance on loans for purchasing a home
. They insure the mortgages for single and multifamily homes, manufactured homes, and hospitals. Since their founding in 1934, they have provided more than 34 million insured property loans. An FHA insured mortgage loan does not require very much cash investment in order to close. In some instances (a higher down payment on the home) there are no closing costs.
FHA mortgages are more lenient on a number of factors. They are more flexible with household income and payment rates. In terms of income, the FHA insured loans require that one must possess a steady employment history. The individual must have worked at the same job for at least two years. They must have a consistent income or increased income for a period of two years. The individual's credit must be in good standing.
A further qualification for an FHA mortgage loan is that there cannot be more than 2 thirty day late payments reflected on the credit history for a two year period. If there are any bankruptcies, they must be older than 2 years. Any foreclosures on the individual's history must be more than 3 years old. Finally, the mortgage payment that the individual qualifies for must be approximately 30% of that individual's total monthly gross income.
The FHA operates entirely from a self-generated income. The cost of the mortgage insurance is passed on to the homeowner. This payment will drop off at the 5 year mark, or when the balance of the loan is at 78% of the value of the property, whichever is longer. The FHA insured loans are made by banks and other private lenders for home building and home buying.
The types of loans that the FHA insures include adjustable rate mortgages and fixed rate mortgage loans. There are also energy efficient loans and graduated payment mortgages. Finally, there are mortgages for condominium units and growing equity mortgages. Depending on your need and the type of home you are interested in will dictate the type of loan that you will get. Your loan representative at your local bank can aid you in assessing the type of loan that is right for you, and help you file all the necessary paperwork to get started.
The FHA is part of the Department of Housing and Urban Development. Their primary mission is to create a strong, sustainable, inclusive community and provide affordable, quality homes for all.
by: Sam Khalil
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