FHA Mortgage Loans

With the Securities Exchange Commission taking a significantly more active role in the activities of financial services firms in the Unites States following the market crash, it’s only fitting that housing organizations and government bodies step in after this industry’s downward spiral. In this case, it is the FHA – the Federal Housing Administration – and their role is to regulate and assist the industry.

However, unlike other regulation horror stories where the end result is negative, this appears to be a move that’s attracting the support of both home owners and the banks that are used to finance homes on their own. With one of the largest housing crises in history behind them, many of the world’s top home loan lenders are happy to see support from a third party, even one that’s largely regulatory.

Strangely, however, the FHA’s role in the mortgage and home loan industry isn’t particularly new, or even a revised and reviewed level of service. Since the passing of the National Housing Act, almost eighty years ago, the FHA has been actively involved in ensuring that Americans can easily access a variety of home loan and mortgage-related services without private commercial interference.

Today, their role is primarily limited to regulating the industry for practices that fall significantly afoul of its major rules, and also backing many home loans with a government-backed insurance service. The FHA works directly with lenders to provide services that combine their insurance in loans that are borrower-friendly, working within the FHA’s guidelines to provide full service.

To understand why this role is so vital today, it’s worth looking back at how the FHA has helped many American homeowners in past generations. Born at the end of the Great Depression, one of the FHA’s early goals was to assist low-income families in acquiring, or potentially reacquiring, property that they may not be able to access due to limited savings and few available home loans.

To do this, the FHA offered a range of insurance services directly to lenders, in turn creating FHA-approved lenders and backing their loans with the confidence of the government. This allowed the lenders to give out loans to people that they would otherwise be unable to provide for, either due to their lower relative income – and thus inability to make repayments – or their risk of default.

It’s important to note that today, the FHA operates in a distinctly different commercial environment than it had in its early days. Today, a number of private mortgage insurance companies exist, giving consumers and lenders alike greater choice in who they work with. This has, in many cases, made it less necessary to have the backing of the FHA in order to offer competitive loans to borrowers.

However, these services are primarily used by lenders dealing to middle-to-upper class Americans, with few dealing to low-end mortgage lenders and other low-income forms of borrowing. For those with a modest income, the FHA remains an important service – one that’s often still the difference between qualifying for a home loan, and missing out due to limited credit history of higher risk.

As the FHA itself is a government organization, it doesn’t offer loans directly. Instead, loans made by a private lender, such as a major bank or smaller credit union, are in turn backed by the lending confidence of the FHA. This allows lender to loan out money without fear of default, while giving borrowers a number of benefits, such as advances towards contract closing and low total interest.

In order to use the FHA’s insurance services for your home loan, the first step is to contact lenders that work directly with the FHA on loan insurance. This will typically require a consultation with a range of lenders. As with any time of loan, this is a worthwhile step anyway, as the interest rates on your loan can differ dramatically – often by a huge margin – from one mortgage lender to another.

Other services offered by the FHA include grants for first-time homeowners, and a variety of other grants for would-be homeowners with a low income. These can include low-volume grants built to speed up the process of closing on a home, and even grants and financial assistance for people that are struggling to keep up with the repayment structure set out under their mortgage agreement.

Veterans of the United States Army, Air Force, Marines, or Navy may also qualify for additional forms of home loan support. The VA Loan program offers loan insurance in a similar way to that offered by the FHA, albeit with some additional benefits. Likewise, people that work as part of a State or Federal Government agency may also be able to claim a grant under home loan programs.

Despite the allure of government-assisted loan insurance and other benefits for homeowners, it’s always best to check your private options. In many cases, better deals can be found with private loan insurance companies, leaving you with a more affordable mortgage without FHA support.

However, for those that benefit from FHA mortgage loans and other loan-based insurance services, the assistance of the FHA can be a huge, empowering force. In many cases, it’s the only difference between owning a home and failing to qualify for a mortgage. In those situations, FDA home loan insurance is a service that’s second to none – a true asset for first-time homeowners.