The FHA’s mission is to encourage home ownership and provide affordable housing opportunities with low down payment and flexible credit requirements.
FHA does not lend money directly to borrowers, it just insures a certain type of loan that is financed by traditional banks and mortgage lenders.
Four of the most visible single family housing programs that FHA offers are, Section 203(b), Section 234(c), Section 203(k) and Home Equity Conversion Mortgages (HECM) – Reverse Mortgages.
FHA Loan Type Highlights:
Section 203(b)
- largest of FHA’s single family programs
- 1-4 unit properties are eligible
- flexible credit requirements
- 3.5% down payment allowed
- down payment may be a gift from specific sources
Section 234(c)
- provides mortgage insurance for individual condominium units
- credit, down payment and limits of 203(b) apply
- in 2010, condominium complexes must be approved through HRAP/DELRAP to be eligible for FHA insurance
Section 203(k)
- primary program for property rehabilitation
- encourages community and neighborhood revitalization
- only 1 mortgage loan is used for both the acquisition and the renovation
- 1-4 unit properties including condominiums are eligible; check with your lender for manufactured housing eligibility
- required improvements include cost effective energy conservation standards and smoke detectors
- consultancy may be required
HECM – Reverse Mortgages
- FHA was the first to promote reverse mortgages nationally
- allows access to equity in property with flexible terms
- lump sum, monthly payments, line of credit or a combination available
- limited to homeowners 62 years of age and older
FHA programs go beyond the scope of the previously listed programs. They offer a Streamline Refinance as well as a Streamline 203(k) for limited repairs. Also, recent legislation has helped FHA offer special programs with incentives to lenders for modifying and refinancing existing mortgages like with the “Making Home Affordable Program.” FHA offers favorable loan terms, higher loan limits, 30 year fixed repayment terms and flexible down payment options.
Credit requirements for most FHA lenders: Majority of lenders lean towards a mid credit score of 640.
To know how much can you afford: Provide your mortgage professional the required documentation, and a detailed analysis will be given that includes your maximum loan amount
