Federal Housing Administration Information and More

Congress created the Federal Housing Administration (FHA) in 1934. The FHA became a part of the Department of Housing and Urban Development's (HUD) Office of Housing in 1965. Generally known as the "FHA", it is the largest insurer of mortgage loans, having insured over 35 million properties since its creation in 1934.

The FHA does not physically lend money, instead they work with FHA approved lending institutions, insuring the mortgage money they lend out. For lenders, this insurance protects against loss if the homeowner defaults on his or her mortgage loan. While FHA insured loans must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan. This alleviates much of the risk to mortgage lenders which in turn makes lenders more likely to lend mortgage money under more reasonable terms.

The FHA is entirely self funded and costs the tax payers nothing. Those homeowners who have a FHA loan pay a mortgage insurance both up front and monthly. This fee is then captured into an account and is used to facilitate the entire FHA lending program. This self sustaining Government mortgage insurance program has helped stimulate the economy by making owning a home more easier, more reasonable and much more affordable.

Because lenders have less risk associated with FHA insured loans, the qualification guidelines are less restrictive than those of a conventional mortgage. FHA loans usually come with a lower FIXED interest rate, flexible credit guidelines and a low down payment option. FHA lenders are more concerned with the borrowers current ability to repay the loan than past credit mistakes or adversities.