This guide, created by the U.S. Department of Housing and Urban Development, explains mortgage options, fees, payments, insurance programs and other helpful information on government-sponsored home ownership programs.
Many Americans dream of owning their own homes, but few families are able to pay cash for them. Many people who could not otherwise afford to own a house become homeowners with the help of FHA mortgage insurance programs.
Helping people obtain financing for their homes is one of the chief purposes of FHA. FHA is the Federal Housing Administration. It is part of the U.S. Department of Housing and Urban Development (HUD). Once you have found the home you want to buy, you must decide how to finance your dream.
How FHA Mortgage Insurance Works FHA mortgage insurance allows a homebuyer to make a modest down payment and obtain a mortgage for the balance of the purchase price.
The mortgage loan is made by a bank, savings and loan association, mortgage company, credit union, or other FHA-approved lender. FHA (HUD) insures the loan and pays the lender if the borrower defaults on the mortgage. Because the lender is protected by this insurance, it can offer more liberal mortgage terms than the prospective homeowner might otherwise obtain.
HUD does not make direct loans to help people build or buy homes.
Who Can Get an FHA-Insured Mortgage Almost any individual who has a satisfactory credit record, enough cash to close the loan, and sufficient steady income to make monthly mortgage payments without difficulty can be approved for an FHA-insured mortgage. Generally, only people who will reside in the property are eligible for FHA-insured mortgages.
HUD sets no upper age limit for the borrower, nor does HUD require that the borrower have a certain income level to buy a home at a certain price. Income is simply one of several factors that help a lender and HUD determine whether the borrower will be able to repay the mortgage.
FHA mortgages are available to individuals regardless of race, creed, religion, sex, or marital status.
Types of Mortgages FHA Insures HUD insures mortgages to buy existing homes, to improve homes, to purchase a newly built home, and to refinance existing indebtedness. FHA-insured mortgages are available for many types of properties, including: • One-family residences • Two-, three-, and four-unit properties • Condominium units • Houses needing rehabilitation.
The terms of FHA-insured mortgages can also be structured in different ways, such as: • Fixed rate, level payment mortgages • Graduated payment mortgages • Growing equity mortgages • Adjustable rate mortgages
Each of these mortgages is explained later in this article.