“What is FHA?
The Federal Housing Administration, under the jurisdiction of the U.S. Department of Housing and Urban Development, is the largest insurer of mortgages in the world. Remember that FHA does not originate mortgages, it only insures them. FHA was started in 1934 following The Great Depression and proved to be a great stimulus to the housing industry by offering 20-year mortgages for up to 80% of the property value, as opposed to typical mortgages of the day which were usually 50% of the property value for 3-5 years with a balloon payment at the end.
FHA Property Standards
FHA was the first to require that properties must meet certain standards before they were deemed eligible for financing by issuing a 16-page booklet titled Property Standards. They followed that up with Minimum Construction Requirements. In 1942 they combined both to form Minimum Property Requirements (HUD Handbook 4905.1).
Today, FHA uses Minimum Property Requirements for existing housing and Minimum Property Standards for new construction.
Why FHA Mortgages?
Even though closing may take longer and there is an up-front Mortgage Insurance Premium (MIP) which must be paid at closing, FHA-insured loans offer refuge to people with little or no down payment. They also have the advantage of being assumable.
FHA Market Share
For the better part of the decade, FHA’s market share was shrinking, and shrinking fast. People weren’t going for FHA-insured loans because it was so easy to get conventional loans at the time, not to mention that FHA had more stringent qualifications. More recently, they have seen an upswing in market share recording 19.9% in 2010 and 15.41 in 2012 (FHA no longer prepares market share reports).
The “New” FHA
Under new Rules that took effect in October 2008, the FHA was able to insure an additional $300 billion of troubled mortgages. Another federal program, launched late 2009 and expanded in 2012, lets homeowners refinance high-cost subprime loans into FHA-backed mortgages with lower fixed rates. That new rule authorizes the FHA to refinance up to 300,000 loans.
Under the 2008 Federal Housing Finance Regulatory Reform Act, provisions were made for the modernization of FHA. It is known as Title I: FHA Modernization Act of 2008 – Subtitle A: Building American Homeownership.”
Are Federal Housing Administration, or FHA, mortgage loans more difficult with processing or closing? Well yes they do require more paperwork, have stringent property requirements, take longer to close, and cost more to close. The homeowner will also pay a mortgage insurance premium.
FHA requires an up-front Mortgage Insurance Premium (MIP) that is paid at closing but can be financed into the mortgage amount. In addition, there is an annual Mortgage Insurance Premium. Click here for current terms.
New rules took effect in October 2008 when FHA was able to insure an additional $300 billion of troubled mortgages. Homeowners with high cost subprime loans were presented with another federal program launched in 2009, FHA backed mortgages with lower fixed rates. The new federal program afforded 300,000 loans to fall under this new rule for FHA authorization. Take a look at where FHA stood at the end of 2013, http://portal.hud.gov/hudportal/documents/huddoc?id=FHAAnnRepDeckv111614.pdf.
Current loan limits in your area: https://entp.hud.gov/idapp/html/hicostlook.cfm
To find out which HOC administers your area, click here. Then click on your state and follow through to your HOC.
The main repository of FHA housing policies is FHA Handbook 4000.1. That Handbook is available for study or download on the HUD website, FHA Appraiser’s page.
HUD housing handbooks can be found here:
Have FHA questions? This link takes you to the FHA Resource Center where you can ask questions through the FAQ site, email, telephone or subscribe to FHA’s Single Family Housing Industry Email List.