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The Federal Housing Administration was created by the National Housing Act of 1934 to help revive and stabilize a housing market devastated by the Great Depression and the breakdown of the banking system. It did so by providing federally backed mortgage insurance, first for construction loans and then long term mortgages. By meeting credit history and down payment criteria established by FHA, a borrower can obtain a 20 year fully amortizing mortgage loan.

The Department of Housing and Urban Development (HUD) authorizes the Federal Housing Authority (FHA) to insure lenders against foreclosure loss for any residential mortgage that does not exceed Congressionally set loan amounts.

Eligibility

FHA financing may be used by any qualified person, whether or not a US citizen. However, the property must be the borrower's principle residence; the borrower must live in the home. The borrower must also have a social security number.

Advantages of a FHA Loan

• Low down payment
• An assumable mortgage subject to approval of assumer's credit
• Right to prepay loan without penalty
• Ability to finance closing costs

FHA Programs and Loan Amounts

FHA maximum loan amounts vary by state and county.

Programs available are a 30 Year Fixed, a 15 year Fixed, and a One Year ARM with a 1% annual cap and a 5% lifetime cap.

On a 30 year fixed/level payment, the monthly principle and interest payment remains the same for the life of the loan.

The monthly principle and interest payment on a One year ARM (adjustable rate mortgage) can fluctuate based on the index (1 year Treasury Bill), and it has a 1% annual cap and a 5% lifetime cap.

GPM (graduated payment mortgage) allows the borrower to qualify at a lower interest rate but requires a larger down-payment and has negative amortization.

More information about FHA