Information Regrading FHA

• In 1965 the Department of Housing and Urban Development (HUD) was formed.  Within HUD operates the Federal Housing Administration (FHA), which has the primary responsibility for administering the government home loan insurance programs.  This program allows a first time home-buyer who might otherwise not qualify for a home loan to obtain one because the risk is removed from the lender by FHA who insures the loan for the lender.

• The most popular FHA home loan program for a first time homebuyer is by far the 203 (b).  This is your standard fixed rate loan for 1 to 4 family owner occupied houses and only requires a minimum of 3.5% from the borrower.  This loan also permits 100% of their money needed to close to be a gift from a relative, non-profit organization or government agency.

• The main advantage to a FHA home loan is that the credit criteria for a first time borrower is not as strict as Conventional loans sold to Fannie Mae or Freddie Mac.  Someone who may have had a few credit problems or no traditional credit should not have a problem obtaining FHA financing.   Also FHA home loans are assumable, allowing a person to take over the mortgage without the additional cost of obtaining a new loan.   FHA loans may require less income to qualify as they will exceed the Conventional debt ratios of 28/36%.

• Many people make the mistake and assume that FHA loans are only available for fist time homebuyers.  This is NOT true.  FHA loans are available to anyone, whether it is your first or fifth home and can be used to purchase a home or refinance a home.  If refinancing a home the current loan does NOT have to be an FHA loan.

Written by: Nancy Crawford, NMLS 237546, MO 3235-MLO – Senior Mortgage Banker, USA Mortgage