If you’re a first time homebuyer, you’re likely to hear a lot about the Federal Housing Administration and the many ways they can help you get into a home. If you’d like to know more about this organization and what they do, here is a brief overview of how they operate and what they can help you with.
The History of the FHA
The events that led up to the creation of the FHA were many of the same things that lead to the Great Depression. When banks and businesses failed because of the stock market crash, many people lost their jobs and became unable to make their mortgage payments. This lead to many homes being abandoned, changing the landscape of once prosperous neighborhoods.
Before the economic crash in the 1930s, the government had little regulation over how banks and other businesses operated. But seeing how quickly the market collapse triggered a collapse in the housing market, they decided to ask. In 1934, they decided to create the FHA to better regulate how mortgages were given as well as the interest rates banks offered.
What Does It Mean to Get an FHA Loan?
One of the most popular services the FHA offers is insuring mortgage loans, particularly for borrowers who may have trouble getting insured through other companies. Mortgage insurance allows a lender to give a loan with confidence. The insurer promises that if you default on the mortgage, they will pay the lender to keep them from having to absorb the loss.
The cost of mortgage insurance through the FHA can be much cheaper than a private insurer, which makes a big difference in the monthly mortgage payment amount. For some buyers, this can mean the difference between being able to afford a home and being priced out.
What Other Services Does The FHA Offer?
In addition to helping people get a mortgage, the FHA offers credit counseling to help keep people in their homes. Homeowners who are having trouble paying their mortgages can contact the agency to find out more about their options, which might include applying for a modification to the terms of the mortgage, putting the home up for short sale or refinancing the mortgage for a lower interest rate.
The FHA previously offered down payment assistance programs to help first time buyers get into a home. While this program is currently not operating, there are bills in Congress to bring it back. These programs are designed to help first time homebuyers in particular, a group that is currently having trouble with the transition to homeownership.
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