The Federal Housing Administration (“FHA”) is a government agency that provides mortgage insurance on behalf of qualifying borrowers, through approved lenders.
This insurance offers financial protection to lenders in the event a borrower defaults on the mortgage obligation. FHA’s goal is to assist lenders by reducing their risk in issuing loans. In the event of a loan default, the FHA will pay the lender, thus reducing the homeowner’s cost of borrowing as the lender bears less risk. Because of this protection and for qualifying borrowers, mortgage products may be more attainable than lending alternatives where insurance is not available.
The Federal Housing Administration was created in 1934 and subsequently became part of the Department of Housing and Urban Development (“HUD”). The FHA offered the prospect of home ownership to Americans at a time when the economic reality of such ownership was out of reach for sixty percent of households. After World War II, FHA help finance military housing and the dreams of veterans returning from the War.
Buying a home can be one of the biggest decisions that you are likely to make. And your closing day can be one of the happiest days. After you have gathered your documents, found the house you want to buy in the neighborhood you want to live in and work through the qualification process, FHA lending helps your home ownership dream become reality.
Subsequently FHA financing spurred the construction of housing for the elderly, handicapped and lower income Americans. Throughout the history of FHA it has stepped in to shore up housing markets during local and national recessions and other economic turmoil. Because of FHA the pride of home ownership has become a reality for those who might otherwise not be able to participate in ownership through private insurance markets or their personal income limitations.
What is the FHA?
The Federal Housing Administration (FHA) offers mortgage insurance to qualified borrowers, through approved lenders. FHA loans:
History of FHA
To reiterate, the FHA was formed in 1934 by Congress. After that, it ultimately became a part of HUD in 1965.
At the time of its creation, the economy was uncertain and there were 2 million unemployed construction workers. With unemployment rates where they were it was difficult for buyers to get mortgages because home loans were limited to 50% of property value with repayment periods of 3 to 5 years. Because of these strict lending conditions, only 4 out of 10 people actually owned homes.
After FHA’s creation, the possibility of being a homeowner was a lot more realistic which sparked the production of millions of units of privately-owned apartments for elderly, handicapped, and lower income Americans. Since its inception, FHA has insured over 34 million home mortgages.
Benefits of FHA
The FHA guarantees home loans, reducing the risk for lenders and thus providing better borrowing terms to home buyers.
The primary beneficiaries of the FHA include: those who have little or no money saved for a down payment, such as recent college graduates and newly married couples; and those with poor credit from bankruptcy or foreclosure in the past (though credit repair prior to acquiring a mortgage is also beneficial).
FHA is the only government agency that does not cost the US taxpayers any money as it operates on income generated by its operations.
This income is derived from the mortgage insurance premiums that borrowers pay in connection with obtaining their home loan.
In addition to the benefits received by homeowners through the ability to own their personal homes, because of these loans, this economic stimulus encourages community development through the establishment of neighborhoods. Neighborhood growth and stimulation in turn benefits communities through local spending, local
business creation, increased local job opportunities, and other revenue.
Preparation for Closing – What to Expect
- Review and Approval of Closing Disclosure (CD) From Lender
- Final Walk – Thru of Home You are Purchasing to Ensure any Repairs Promised Have been Done and to View Overall Condition Prior to Closing
- Closing Funds – Either Wire Your Closing Funds to the Title/Escrow Company or get a Cashier’s Check from your Bank for the Amount Needed for Closing
- Insurance – Before you can Close on the Purchase of the Property, you Need to Secure Your Homeowner’s Insurance
- All Borrowers Need to Come to Closing with a Valid Driver’s License for Proper Identification
- All Documentation will be Explained with as Much Detail as Needed to Borrowers Prior to Signature of Loan Documents
- Be Prepared to be at Closing 45-60 minutes as there is a lot of Paperwork to Sign
- Once Your Loan has Funded the Title/Escrow Company will Make Arrangements for you to get the Keys to your new Home!
Preparations and Tips for the Big Move!
- Declutter – As you Pack it’s a Good Time to Make Three Piles…..Donate, Keep and Sell (Garage Sale, Online). This will Save You Time and Money by not Packing, Moving and Unpacking Items not Needed or Wanted.
- Find a Moving Company or Rent a Moving Truck
- Storage Units or Temporary Housing if Necessary
- Set Up TV and Internet Transfer
- Arrange for Child Care – with Sitter, Family Member/Friend
- Childproof New Home if Needed
- Take Care of Pet’s Needs
- Change the Locks on Your New Home to Keep Your Family and Possessions Safe
- Arrange for Transfer of Utilities
- Change Your Address with the Post Office
- Update Address on Driver’s License and Vehicle Registration – Most States Require this to be Done Within 30 days of Your Move