What is the Federal Housing Administration Or FHA?

The Federal Housing Administration, also know as FHA, is a government agency that helps home buyers finance their home purchases in low income areas. FHA loans help to reduce the requirements in order to obtain financing. A government subsidized loan is a great way to obtain financing because the lender does not hold as much risk as a conventional loan scenario.

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The Federal Housing Administration or FHA is a creation of the Depression era Congress. Created in 1934 to help low income home buyers get reasonable interest rates FHA loans helped to pull the United States out of the Depression. Since then potential home buyers have lost faith with FHA loans and have move towards other sub prime loans. In recent years, however, the adjustable rate mortgages that those sub prime loans typically featured have become rather taboo as they have become increasingly difficult for first time or low to moderate income buyers to afford. The decline in predatory sub prime loans, as well as changes made by Congress to make FHA mortgages more readily available and proposed changes that would ease restrictions has created a new demand for the government’s largest mortgage program. Current features that make FHA loans a viable option for low to moderate income buyers and those with less than perfect credit include relaxed emphasis on credit score and the minimum 3% down payment. A down payment as small as 3% is considerably smaller than down payments typically associated with more conventional loans. There are even down payment assistance programs that can help. FHA down payment assistance programs, such as Nehemiah and AmeriDream, help potential home buyers achieve their dreams or home owners ship by providing grants to help buyers pay for their down payments and other closing costs. Because of the recent backlash towards sub prime loans Congress has been forced to take action. Recently the House Financial Services Committee voted 45-19 to expand the role of FHA by allowing them to accept more FHA refinance applications from home owners struggling to make payments. This proposal will now be sent to the floor of the full House where it is expected to pass without trouble. Problems are likely to arise when the bill reaches the Senate, where a similar bill failed last year. However, the new Senate has a democratic majority and they have held numerous hearings regarding the needed expansion of FHA powers.