Federal Housing Administration (FHA) Foreclosure Assistance And Help
The FHA was established to improve and ensure the standard of living
for homeowners. The FHA assists both borrower and lender alike with
several different types of help, such as insuring mortgages and stabilizing
the mortgage industry.
The FHA is the Federal Housing Administration which is a part of the
United States government agency. It was created as a part of the National
Housing Act. The main goals of this agency are to: improve living standards;
insurance of mortgage loans; and to stabilize the mortgage market. These
initiatives have helped the citizens from being mortgaged out of their
own homes.
This agency is completely self funded and has insured more
than 34 million home mortgages as the statistics say. The FHA offers
mortgage insurance on loans made by lenders. These lenders are generally
those approved by the FHA. It insures the mortgages on homes and hospitals
irrespective of the ownership as long as the credits of the mortgagor
are satisfactory.
How the FHA Helps
The FHA mainly helps in securing the loan process as a whole. They decide
the details of the loan; if the lender is credible and if the borrower
can meet the requirements etc. FHA offers this as an insurance called
the FHA mortgage insurance.
This helps in promoting the interests of
the lenders in case the borrower tends to default. The FHA will pay the
lender directly in this case and the borrower will now have to deal with
the FHA directly in order to face foreclosure.
The FHA insurance checks
the borrower for his ability to pay off the loan; by means of asset or
monthly insurance interests which the borrower has to pay. The household
income and payment ratios are calculated before offering the insurance
to the borrower. The borrower has a credit score associated with him
which is directly proportional to the percentage of loan which needs
to be invested by the homeowner.
How the FHA Loan Works
The FHA loan offers the homeowner to buy a home after assessing these
criteria. The homeowner needs to pay monthly mortgage insurance for a
period of about 5 years. The loan needs to pay down to 78% of its value.
Hence the borrower pays accordingly. In case of a default from the borrower,
the lender immediately approaches the FHA. The FHA pays almost 97% of
the loan to the lender and offers the remaining 3% after the home is
sold off or once the down payment of the home is received.
This insures
the lender against a huge loss in case of a default. The borrower on
the other hand has to pay the down payment of 3%. This can be paid using
the personal cash of the borrower.
The cash can also be paid as a gift
by some family member or employer or the labor union. At times government
entities and certain non-profit organizations can step in to protect
the interests of the borrower. FHA has certain grants for the down payment.
These are generally collected from the seller funded programs, federal
government programs, Grant America programs etc.
The FHA sells the home
to prospective buyers and pays off the borrower the remaining amount
in a month or two. Hence this maintains a regulated secure transaction
all the time.
The FHA helps the buyer and lender in several stages. It assists in granting
a loan to the buyer. It helps in securing the interest of the lender.
The next stage involves the down payment assistance, which is easily
available in FHA loan system. Finally it helps in the refinancing of
the mortgage secured using a FHA loan program.
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