FHA single family home loans and mortgage refinancing

The Federal Housing Administration’s insurance program was created to help moderate to low income families obtain homes by lowering mortgage costs. The FHA also provides mortgage insurance which encourages mortgage companies to make loans to borrowers that they otherwise would not. Often the people eligible for FHA home loans do not meet the demands of traditional mortgage companies. The mortgage insurance provided by FHA protects a mortgage company against loan default for properties such as manufactured homes, single family and multifamily properties, and some health facilities. In the 1930’s the FHA helped save homeowners for defaulting and helped open suburban homes for war veterans in the 40’s and 50’s – this has helped shape the mortgage finance system of today. Currently the FHA 1 to 4 Family Mortgage Insurance is a valuable tool in which the government can enlarge home ownership possibilities for first time home buyers that would otherwise not qualify. In 1997 the FHA insured more than 700 000 homes valued in total to about 60 billion dollars. Up to this point, the FHA has insured about 7 million loans valued at a total of about 400 billion dollars. FHA protects these obligations with the Mutual Mortgage Insurance Fund which is kept alive by borrower premiums. There are a few features of a Single Family Mortgage Insurance Program provided by the FHA:

1. Various closing costs can be financed with this program. In conventional style loans the borrower must pay closing costs at the moment of purchase – this works out to about 2 or 3 percent of the price of the home. The FHA program allows borrowers to finance these charges, which in turn reduce the cost of the home. Please take note that borrowers pay insurance premiums to get FHA mortgage insurance – an up front fee as well as monthly premiums that cannot be financed, but can be added to the mortgage payments.

2. Low downpayments can be very low with the FHA single family mortgage program. Conventional mortgages on the other hand require about 10 percent of the purchase price or more. The FHA can reduce downpayments to as low as 3 percent because FHA insurance lets a borrower finance 97 percent of the total value of the home being purchased.

3. The FHA limits the amount of fees that mortgage companies may charge i.e. loan origination fees.

4. Only a certain amount of a mortgage can be insured. This is a restriction within the FHA program set in order to ensure that the program serves low or medium-low income single family homes.

For more complete details on how FHA loans work please visit the official website at www.fha.com