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Come Home to FHA

How FHA helps REALTORS® sell more homes

The Federal Housing Administration (FHA) provides mortgage insurance on loans made by more than 8,000 FHA-approved lenders throughout the United States and its territories. Since FHA was established in 1934, it has insured more than 34 million home mortgages and nearly 50,000 multifamily project mortgages. FHA currently has 4.8 million projects in its portfolio. This makes it the largest insurer of mortgages in the world.Every REALTOR® should know that FHA-insured mortgages are solid, reliable ways for qualified clients to finance homes at market rates?rates that compete with conventional mortgages.

FHA-insured loans are particularly well suited for:

  • First-time homebuyers
  • Borrowers without a lot of money for a down payment
  • People who want to keep monthly payments as low as possible
  • Those who are worried about monthly payments increasing
  • Those who are worried about qualifying for a loan, and
  • People with less than perfect credit.

FHA-insured loans offer benefits and protections not found in other loans, including:

  • Lower cost. — FHA loans have competitive interest rates because the Federal government insures the loans for lenders.
  • Smaller down payment. — FHA loans require a cash investment of only 3.5 percent, and the money can even be a gift from a family member, employer, or charitable organization -- an option that other loan programs don't allow.
  • Easier qualification. — Because FHA insures the mortgage, lenders are often more willing to offer loan terms that make it easier to qualify.
  • Less than perfect credit. — A borrower does not need perfect credit to get an FHA mortgage. Borrowers who have had credit problems, such as a bankruptcy, will qualify more easily for an FHA loan than for a conventional loan.
  • More protection to keep the home. — FHA has programs to help home owners stay in their homes and avoid foreclosure.

Not the same old FHA

FHA is a leader in protecting against foreclosures -- an important consideration in today's housing market. FHA's loss mitigation program authorizes lenders to assist borrowers in default. Other changes, include:

  • A HUD developed automated underwriting system that evaluates credit risk and ensures applicant evaluations are done by the same scoring process.
  • FHA has also changed its guidelines for appraisals to make them the same as conventional appraisals, with focus now on the valuation of the property.
  • FHA's loan to value ratio is now comparable with other prime products. Upfront premiums, which may be financed, cannot exceed 3.0 percent. Premiums for first time homebuyers who complete a counseling program cannot exceed 2.75 percent. The annual premium is 0.5 percent.
  • Borrowers can now pay any closing costs that are customary and reasonable in the local market. However, FHA does not allow a borrower to pay a tax service fee, and the borrower cannot be charged an origination fee greater than one percent on forward mortgages.

Learn More at realtor.org .