HUD, the U.S department of Housing and Urban Development, is a cabinet branch of the federal government that focuses on assisting Americans looking to purchase a home. This is done through several home financing programs including HUD’s most popular branch, the federal housing administration or as it is commonly referred, the FHA.
The FHA
For a little known fact, not only is the FHA the largest mortgage insurer in the nation but also the world. Since the Federal Housing Administration’s conception in 1934, the FHA has insured over 34 million homes and according to the HUD website, the FHA “provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories.” These mortgages can be used for several styled homes including manufactured, multifamily and single family homes and assists American citizens at all income levels to become homeowners. Many people think the FHA is a mortgage provider, but in fact this agency provides government insurance on mortgage loans, making the home purchasing process easier through reassured, financially insured and certified lenders.
FHA Insurance for Mortgages
The point of the FHA mortgage insurance is to insure against financial loss for lenders in an instance where a homeowner defaults on their home loan. In cases of default, the FHA will pay the mortgage lender an insurance claim amount. This nudges lenders to loan more money for homes with little to no risk because of FHA insurance.
The Benefits of FHA Loans and How They Work
Obvious benefits of an FHA home loan go to the mortgage lender who has their financial investment protected through the government HUD agency. But future homeowners benefit as well. The odds of getting approved for a loan improves through the FHA and these mortgage loans also provide maneuverability in monthly payments due to a potential homeowner’s income. Other benefits to the homeowner can include minimal cash down during the loan’s closing (most loans require 10% to 20% of the loan at closing, this is not the case with FHA loans) and only requiring the FHA insurance for five years, usually less.
The Steps to Funding a Mortgage with the FHA
There are a few basic steps to lead homeowners to their dream home through utilizing the benefits of the FHA and HUD programs.
1. The first step to funding a mortgage with the FHA is to determine what monthly payment costs can be afforded. Many financial sites recommend spending no more than 30% of a monthly income on living costs, so that may be something to keep in mind when looking to purchase a house. We recommend our comprehensive mortgage calculator to determine monthly mortgage payments.
2. The second step is to explore the benefits that are available through HUD (expert advice is available) and hire a real estate agent to assist in finding the perfect home.
3. Lastly, discuss with one of our FHA certified loan officers the purchase of a dream house with a FHA-Insured Mortgage. This will begin the process of funding a mortgage with the FHA.
The FHA Program
The FHA program is an excellent resource for home buyers who may not be able to afford closing costs or are looking for negotiable monthly mortgage payments. Whether a first time home buyer or choosing to use a FHA streamlined refinance, this government program provides several benefits to the lender, the homeowner and even the communities these homes are found within.
The FHA Program
The FHA program is an excellent resource for home buyers who may not be able to afford closing costs or are looking for negotiable monthly mortgage payments. Whether a first time home buyer or choosing to use a FHA streamlined refinance, this government program provides several benefits to the lender, the homeowner and even the communities these homes are found within.