Mortgage: What is FHA Financing?

By Toni Ryan, First Priority Financial

Do you  have questions about FHA….but didn't know where to ask.  The question “What is FHA?” was searched on the internet 235,000 times nationally last month so 'wondering minds want to know'.
 FHA stands for the Federal Housing Administration which is part of HUD (Department of Housing and Urban Development).  FHA has been helping people to purchase homes since 1934 by insuring the loan which allows lenders to offer the homebuyer better terms.  The FHA insured loan offers low down payments, low closing costs and often easier credit qualifications thus allowing more people to purchase a home. There is an initial insurance premium payment which is added to the loan and then a monthly premium payment included in your monthly mortgage payment.  This “insurance” covers the lender if the homeowner cannot make their loan payments and defaults on the loan.
 Buy Your First Home - FHA loans have programs for the first time homebuyer with a down payment as low as 3.5% of the purchase price.  Closing costs can often be financed in the loan. FHA rates are extremely competitive and the insurance can be dropped when the loan on the property reaches approximately 78% of its total value and after 60 months.
 Buy a Fixer-Upper  FHA has loan programs referred to as a 203K which will allow a buyer to purchase a home, fix it up and include all the costs in one loan.  If you own a home and you want to remodel or repair it, you can refinance what you owe and add the cost of repairs in one loan. Financial Aid for Seniors  If you are age 62, live in your home and either own it outright or have a low balance, a reverse mortgage may be an answer. A reverse mortgage (HECM) is a special type of home loan that lets you borrower the equity in your home and convert it into cash. But unlike a traditional home equity loan, no repayment is required until the borrower(s) no longer use the home as their principal residence or fail to meet the requirements of the mortgage. You can also use this type of loan to purchase a primary residence if you are able to use cash on hand to pay the equity requirements. A large down payment may allow you to own the home with no monthly payment.
 FHA also has programs that allow homeowners to make their homes more energy efficient as well as mobile homes and manufactured housing financing.  Options are available to allow homebuyers to take advantage of the current housing market and low rates.  Check with an FHA loan specialist and find out how you can use this program to reach your goals.