The Federal Housing Administration (FHA) is a United States Government agency which was created in 1934 as a part of the National Housing Act of 1934. The main objectives of the FHA are to stabilize the mortgage market, provide insurance for mortgage loans, and to improve housing standards. In fact the FHA finds its roots in the great depression of the 1930’s when thousands were unemployed and foreclosures were an everyday occurrence. FHA was created in order to provide insurance to mortgage loans and encourage augmentation in the number of mortgages that were approved.

• The National Housing Act of 1934 was passed in the wake of utter poverty and unemployment of the great depression and the Federal Housing Administration was formed. Its plan was to control the rate of interest and the stipulations of mortgages that it insured. These fresh lending practices augmented the number of people who could find the money for a down payment on a residence and monthly debt service payments on a mortgage, thus also growing the volume and magnitude of the market for single-family homes.
• In the year 1965 FHA became a part of the Department of Housing and Urban Development (HUD) and both have together insured over thirty four million mortgages since 1934. Furthermore they have also insured more than forty seven thousand multifamily projects and according to some sources the FHA has 4.8 million insured single family mortgages and 13,000 insured multifamily projects in its portfolio. The FHA is the only government agency that is fully self funded and has only got into trouble once in the last three decades after the recent sub-prime mortgage crisis.
• In the aftermath of the sub-prime mortgage crisis FHA found itself financing almost one third of the country’s mortgages and since most were high risk borrowers the losses to FHA could cross the $100 billion mark. The price of such losses may now be paid by the tax payers on whom the FHA relies in times of trouble such as these; however it is only an implicit understanding that tax payers will bail out FHA if such situations are encountered.
• The FHA down payment can come from a variety of sources such as labor unions, employers, family members, and government entities since it is only 3.5%. The insurance itself is required for any FHA mortgage irrespective of the size of the down payment provided. FHA loans are insured by a combination of an upfront mortgage insurance premium (UFMIP) and a monthly Mortgage Insurance (MMI). The UFMIP is a compulsory payment, which can either be made in hard cash at closing or financed into the loan, so that the borrower actually pays it over the life of the loan. It includes a certain amount to the borrower’s monthly payments, but this is not PMI or the MMI.
• The various types of loans offered include – Adjustable Rate Mortgages, Fixed Rate Mortgage loans, Energy Efficient Mortgages, Graduated Payment Mortgages, Mortgages for Condominium Units, and Growing Equity Mortgages. However there are certain criteria to be met in order to qualify for these loans and some of the requirements are elaborated below.
• The criteria for qualifying for an FHA loan are usually based of the applicant’s income, credit score, and employment history. These requirements are – Steady employment history, at least two years with the same company, steady or growing income over the past two years, credit report must be in good standing with less than two thirty day behind schedule payments in the past two years, any bankruptcy on record should be no less than two years old with good credit for the two successive years, any foreclosure must be no less than three years old, mortgage payment qualified for should be roughly thirty percent of the borrower’s entire monthly gross earnings or less, and the borrower needs to be verified in 4155 if a new appraisal can be issued to re-determine the LTV to drop the mortgage insurance before the normal amortization making the loan be at a loan to value (LTV) of 78%.
• The advantages of FHA loans cannot be denied and the volume of mortgages through FHA has steadily risen in the recent past. It is clear that the FHA is here to stay and many members of congress are supporting the agency and striving to make it a for-profit institution that promotes competition. FHA has considerably improved its mortgage relief efforts by serving at-risk borrowers avoid foreclosure with its refinance programs such as FHA Secure and Hope For Homeowners (H4H). FHA has saved thousands of borrowers with such programs including people facing temporary economic hardship, under-water borrowers, and those affected by adjustable rate mortgages.

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