The Federal Housing Administration (FHA) is a government agency that is part of the U.S. Department of Housing and Urban Development (HUD). The FHA’s mission is to provide mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. As the largest insurer of residential mortgages in the world, the FHA insures over 40 million properties and has been helping homeowners achieve the American Dream since 1934.
FHA Mortgage Insurance is a type of loan that is backed by the FHA. It is designed to help borrowers who might not qualify for a conventional loan by providing a lower down payment and more flexible underwriting guidelines. When you take out an FHA mortgage, you borrow from a mortgage lender, not the FHA. The mortgage lender makes sure that the property you are buying meets FHA requirements and then makes the loan. The mortgage lender then sells the loan to investors who are attracted to the loan because it comes with FHA insurance. This insurance provides investors with peace of mind, knowing that if the borrower defaults, they can recoup their losses by making a claim on the FHA insurance.
FHA is the only government agency that operates entirely from its self-generated income and does not cost taxpayers anything. The proceeds from the mortgage insurance paid by homeowners are captured in an account that is used to operate the program. By providing homeownership opportunities, the FHA helps stimulate the economy and benefits local communities through job creation, building supplies, tax bases, schools, and other forms of revenue.
The FHA Mortgage Insurance exists to help people achieve their homeownership dreams. Unlike conventional loans that have strict underwriting guidelines, FHA loans have more flexible guidelines that allow for a lower down payment, lower credit score, and seller concessions. The FHA mortgage insurance is passed along to the homeowner and is typically included in the monthly payment. In most cases, the insurance cost to the homeowner will drop after five years or when the remaining balance on the loan is 78% of the value of the property, whichever is longer.