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Mortgage Library: Types of Loan Programs: FHA Programs
|The Department of Housing and Urban Development (HUD) is the federal agency responsible for national policy and
programs that address America's housing needs. The Federal Housing Authority (FHA) which is part of the HUD plays a major role in
supporting homeownership by underwriting homeownership for lower- and moderate-income families. FHA assists first-time home buyers and others who might not be able to meet down
payment requirements for conventional loans by providing mortgage insurance to private lenders. Everyone, who has a satisfactory credit record, enough cash to close the loan, and
sufficient steady income to make monthly mortgage payments can be approved for an FHA-insured mortgage. To get a FHA-insured loan, you need to apply to a HUD-approved lender.
FHA-insured loans are available in urban and rural areas for single family homes, for 2-unit, 3-unit, and 4-unit properties, and for condominiums. Interest rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans. Down payments can be as low as 3 percent, and closing costs can be wrapped into the mortgage.
With an FHA-insured mortgage, you can make extra payments toward the principal when you make your regularly monthly payment. By making extra payments, you can repay the loan faster and save on interest. You can also pay off the entire balance of your FHA-insured mortgage at any time.
FHA loans cannot exceed the statutory limit.
Section 203(b) is the most frequently used FHA program. You may use this program to purchase a new or existing one- to four-family homes, including manufactured homes, in both urban and rural areas. A section 203(b) fixed mortgage may be repaid in monthly payments over 10, 15, 20, 25, or 30 years.
Section 234(c) provides mortgage insurance for buyers who wish to purchase a unit in a condominium project. The condominium may consist of more than one building, such as a group of row apartments, high-rise buildings, townhouses, or any combination of these structures. Any condominium project must be approved by HUD.
In some cases, HUD insures loans (section 237 loans) for people who have had credit trouble and do not meet standard credit requirements to buy low cost homes.
FHA also insures loans for home improvements -- 203(k) loans. Section 203(k) mortgages allow you to purchase or refinance and rehabilitate a home at least 1 year old. A portion of the loan proceeds are used to pay off the existing mortgage, and the remaining funds are placed in an escrow account and released as rehabilitation is completed. The improvements financed with Section 203(k) mortgage proceeds must comply with HUD's Minimum Property Standards and all local codes and ordinances.
All the programs operate through FHA approved lending institutions which submit borrower's applications.
Does HUD Owe You a Refund?
For more information about HUD's programs please contact your local HUD office. Each state has at least one office.
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