Guide to Common FHA Mortgage Programs
By: Dan Lewis | Posted: 12th December 2006
For many first time homebuyers, the FHA is a godsend. Why? It offers a number of programs that help people get into their first home when they otherwise might not be able to.
Guide to Common FHA Mortgage Programs
The FHA is run under the auspices of the U.S. Department of Housing and Urban Development. It is specifically charged with creating opportunities for individuals to enter the housing market. It does this by creating favorable financing conditions that motivate lenders to provide financing to borrowers the lender might otherwise reject. Importantly, the FHA rarely lends or assist borrowers directly, to wit, everything is done through third party lenders. Let’s take a closer look at some of the programs the FHA uses to accomplish these goals.
The “203” program is an umbrella program that covers a lot of helpful program initiatives for borrowers. Section “b” of the program is one of the most important. Under section b, the FHA is charged with guaranteeing loans written by lenders for low-income borrowers. Essentially, the FHA tells the lender that it will guarantee repayment of the loan in case the borrower defaults. This removes the risk for the lender. It also motivates them to lend to borrowers that they otherwise would avoid.
Section “k” of the 203 umbrella is less well known, but a real opportunity for many borrowers. If you watch television, you probably have seen the reality shows where people flip homes for profit or just to get a good deal. They buy a fixer upper and then improve it dramatically. Well, the section k program falls into this category. The FHA essentially guarantees the loans lenders give out for the purchase and renovation of fixer uppers. If you are considering buying a fixer upper, you should definitely check out this program.
While there are many variations of FHA loans we can explore, let’s take a look at a hidden nugget that most people are unaware of. In this case, we are talking about the EEM loan. EEM stands for Energy Efficient Mortgage. As the name suggests, the program provides financing for borrowers to add energy efficient items to their home. These items can range from solar panels to energy efficient appliances. The EEM ties into the overall financing for the home, so it must be applied for when you purchase the residence.
Obviously, the FHA plays an important role in giving people access to home ownership. The above programs represent only a small slice of the various FHA programs out there. Before buying a home, make sure you investigate the FHA to see if there are programs you can use to get favorable financing.
Dan Lewis is with Great Western Mortgage - San Diego mortgage lenders providing home loans, refinancing and other financial services.
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Tags: nugget, closer look, housing market, fha loans, u s department, renovation, department of housing and urban development, housing and urban development, time homebuyers, uppers, department of housing, godsend, borrower defaults, auspices