FHA Mortgage Insurance ProgramIf you are in the low to moderate income category, the FHA mortgage insurance program is the best for you. This particular program helps low and moderate income first time home buyers become homeowners by lowering some of the costs of their mortgage loans. The FHA mortgage insurance program also encourages mortgage companies to make loans to Section 203(b) Section 203(b) is the centerpiece of the FHA mortgage insurance program. It is 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. One to Four Family Mortgage Insurance Today, FHA One to Four Family Mortgage Insurance is still an important tool through which the Federal Government expands home ownership opportunities for first time homebuyers and other borrowers who would not otherwise qualify for conventional loans on affordable terms. This also works well for those who live in under served areas where mortgages may be harder to get. FHA Mortgage Insurance Program History In 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 Section 203(b) has several important features: Downpayment requirements can be low. In contrast to conventional mortgage products, which frequently require down payments of 5 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 down payments 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. This is a great plus to this particular FHA mortgage insurance program. 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 mortgage companies may charge in making a loan. For example, the loan origination fee charged by the mortgage company for the administrative cost of processing the loan may not exceed one percent of the amount of the mortgage. This can be a great savings to you. 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.
If you would like to return from this page to Finding the Best FHA Home Loans main page, click here.
Or return from FHA Mortgage Insurance Program, to First Time Home Buyer Solutions home page.
|
