The Federal Housing Administration (FHA) Loan is tailored to those who might not have the usual 20% required down payment for their home. The Federal Housing Administration is an agency of the United States Department of Housing & Urban Development (HUD). Here are the characteristics of the FHA Loan.
Increasing American Home Ownership Rates
The United States federal government has established programs such as the FHA Loan to increase American home ownership rates. Home owners provide the moral backbone, spiritual vitality and financial tax base for governments. When Southern California home owners benefit, the United States benefits.
The FHA sets the general terms and conditions for these loans; the financial institutions provide the capital. The FHA must approve each lender before they can offer FHA Loans. Each FHA-approved lender has its own specific terms and conditions.
Advantages of the FHA Loan
The FHA Loan has created a number of special features to help the under-served members of society purchase their own homes. These benefits are especially tailored to those who might already be receiving government assistance. Here are three of the primary advantages of the FHA Loan Program:
- Lower Down Payment
- Assistance Paying Costs
- Special 201(3) HELOC
Traditionally, Southern California mortgage lenders require at least 20% of the home value as a down payment. The FHA Loan allows for a lower down payment.
Down payments can be made by the individual, a family member or local government down-payment assistance program grant. Home sellers can even pay for some of the borrower’s appraisal, title and closing costs under FHA guidelines.
The FHA has its own HELOC program called the 203(k), which can be used for repairs.
FHA Loan Mortgage Insurance May Be Required
In order to protect the Southern California mortgage lender against default, the borrower must make two mortgage insurance payments: 1. “Upfront Premium” and 2. “Annual Premium.” These mortgage premiums are based on amount, length and initial loan-to-value ratio.
If you don’t have the full 20% down payment, you might want to look into FHA Loans.