What is a FHA Mortgage?

Many borrowers are confused exactly about exactly what a FHA mortgage is. Most consumers associate FHA loans with first time home buying but FHA offers a wide variety of mortgage loans to meet the needs of a significant range of borrowers. The federal Housing Administration was created in 1934 by the U.S government in an effort to assist home buying in the United States of America. Since then FHA has helped millions of people become homeowners. FHA has also helped millions of homeowners refinance their home as well. With aggressive loan programs for refinancing, many borrowers began using FHA for cash out and FHA streamline refinancing when interest rates fell.

FHA mortgage loans are great for borrowers with little equity. The standard FHA refinance enables borrowers to refinance with only 3.5% equity. The cash out loan requests 15% home equity and the streamline refinance requires no equity and no income documentation.

FHA mortgages are also popular with borrowers who have limited or bad credit. FHA guidelines are more flexible than conventional mortgages because they will approve borrowers with credit scores as low as 500. Conventional lenders are looking for borrowers with credit scores over 620, so there is a big difference when it comes to credit.

At the FHA Mortgage Loan Company, our team of licensed loan officers provides consultation for both refinance and home purchase loans that are insured by FHA. They will help to determine which loans meet your needs and which programs you are able to qualify for.

Congress is working with the Federal Housing Administration on measures to reform to the FHA's reverse mortgage. As the proposed legislation stands, before discussion by the full committee it would:

  • Raise the minimum capital reserve ratio of the Mutual Mortgage Insurance Fund from its current 2 percent to 3 percent. There will be targets set for the transition to this ratio and if FHA does not meet them the bill would require the Department of Housing and Urban Development (HUD) under which FHA operates to take immediate action to address the shortfall while keeping Congress fully informed.
  • Require minimum annual mortgage insurance premiums to improve the long-term solvency of FHA with premium levels reevaluated annually to ensure they cover expected risks and maintain the capital reserve ratio.
  • Require HUD to evaluate and revise as necessary underwriting standards using criteria similar to the Consumer Financial Protection Bureau's (CFPB's) Qualified Mortgage Rule.
  • Require HUD to consolidate policies, processes and procedure guidelines for lenders and servicers to eliminate confusion, clarify lending and servicing standards, and ease regulatory burdens.
  • Provide HUD with new tools with which to hold lenders accountable for issuing inappropriate or fraudulent mortgages.
  • Help stabilize FHA's reverse mortgage program by giving the HUD Secretary greater operational and regulatory flexibility.